This post as tangentially related to leveymg's most excellent recent diary "Larger CIA and DoD Privatization Scandal Emerging from Walter Reed Story, US Attorneys Firing" which centers around hedge fund giant Cerberus. If you haven't had a chance to check that diary out, be sure to do so because it is a very worthwhile read.
In this diary, we're going to delve into the intertwined, and quite convoluted scandals involving, among st other things: - Alleged bribes to Ariel Sharon by Martin Schlaff, an Austrian industrialist, that were used to pay back illegal campaign contributions Sharon used in 1999. - The scandalous collapse of Refco, the commodity futures giant, and the related collapse of BAWAG, one of Austria's largest banks (Cerberus recently bought BAWAG, BTW). - Martin Schlaff's investment in Yasser Arafat's "Oasis Casino", and that casino was tied into by the BAWAG/Refco scandals AND Ariel Sharon's right-hand-man Dov Weissman. - Martin Schlaff's and George "Macaca" Allen's involvement with the "Xybernaut" pump-and-dump stock fraud. - Martin Schlaff's apparent financier of far-Right Israeli politician Avigdor Lieberman - and finally, the potential for a crisis in Israel's democracy due to endemic corruption, and the chilling figures that could take advantage of such a crisis.
Get to know your BAWAG So, let's get started with a look at the BAWAG scandal that rocked Austria's politics:
Austrian Bank Scandal: When Socialists Play With Money From the desk of Chris Gillibrand on Tue, 2006-04-04 22:53
A major banking scandal is rocking the Austrian political elites – left and right. A bank owned by the Socialist trade union (which is close to the Socialist Party SPÖ, currently in opposition) loses billions in shady hedge deals while the union strike fund evaporates in the Caribbean and the bank gets implicated in a corruption case in Israel. Meanwhile the bank is financed by the European Investment Bank (EIB), and an Austrian Finance Ministry official (married to the Socialist ex-chief of the bank) ignores a crucial report and is appointed to the Executive Board of the European Central Bank (ECB). The Conservative Finance Minister claims to know nothing – after just having sold the Government-owned Post Office Savings Bank (PSK) to the socialist bank. Welcome to Austria, presently presiding the European Union council of ministers.
Let me introduce!
The Bank für Arbeit und Wirtschaft AG, BAWAG or in English, ‘Bank for Employment and Commerce’ was founded in 1922 by the Socialist Chancellor Karl Renner. Up until now the majority stakeholder in the Bank has been the Austrian Trades Union Federation, the ÖGB. With the repurchase of the shares of the Bayerische Landesbank in 2004, it is now wholly-owned by the ÖGB. The bank’s original intent, from which it has strayed far, was to extend cheap credits to the needy.
Almost all of the members of the BAWAG Supervisory Board are fully paid up socialists and trade unionists. The two exceptions are Albert Hochleitner, the ex-CEO of Siemens Austria, and Leo Wallner, the chairman of the state-owned monopoly, Casinos Austria. Günter Weninger, chairman of the Supervisory Board, who has now been forced to resign, also has a day job as the Finance Chief of the ÖGB. He started professional life as an electrician which has given rise to suggestions in the Austrian press that he might have to return to his original trade. The Managing Board has eight members, four of whom have now resigned. The CEO, Johann Zwettler had already resigned in October 2005. He and his predecessor, Helmut Elsner, are now under police investigation.
...
Make of note of Casinos Austria's CEO sitting on BAWAG's board, as it will figure in heavily once we get to Arafat's "Oasis Casino".
Continuing...
... BAWAG opened up operations in the Caribbean in 1995 under the direction of Wolfgang Flöttl, the son of the then CEO, Walter Flöttl. The idea was that these investments should hedge risk. When it was made public that the son received $2 billion from BAWAG without the father seeking the formal approval of the Supervisory Board, the Caribbean business got closed after a year. The extent of Supervisory Board knowledge is still questioned.
After the departure of Flöttl Senior, the business was then reopened by Flöttl’s successor, Helmut Elsner, with Supervisory Board approval after only one year. Elsner was already known as Flöttl’s “man for big business.” Living well, he enjoyed a service penthouse provided on the top of the BAWAG offices in Vienna as had his predecessor, Flöttl. Also provided with a penthouse was the head of the socialist trade union ÖGB, Fritz Verzetnitsch.
This time around, Flöttl Junior invested in high-risk funds and the business clocked up a massive loss of almost €1 billion which threatened the solvency of BAWAG in 2000. The Bank was only saved by a guarantee from the ÖGB (trade union dues amount to 1% of members salaries, so they have accumulated quite a lot of money to play with). The losses themselves were systematically covered up in offshore accounts in the Caribbean and accounts at a US futures broker called REFCO. The union strike fund went walkabouts as collateral in the Caribbean and disappeared. ...
There's much more interesting info on BAWAG in that article, so be sure to check it out.
BAWAG, Refco, Martin Schlaff, PIPEs, and George Allen's Xybernaut scandal Before we move on to look at how BAWAG and Refco were used for money-laundering by Yasser Arafat(with a great deal of intertwined involved by Ariel Sharon's clique), we should note that BAWAG was sold to Cerberus back in December. One of its new board members includes Former Treasury Secretary John Snow. The purchase of a financial behemoth like BAWAG isn't the only major purchase Cerberus has made recently. In addition to the Bank Leumi takeover, Cerberus acquired a majority stake in GMAC last year, and is reportedly eyeing Chrysler.
These kinds of mega deals pretty amazing when you consider that Cerberus, starting with $10 million in capital in 1992 started off investing the high-risk corporate debt market, moving into outright acquisitions and management of small distressed companies. The purchase of the ailing BAWAG by Cerberus is also somewhat ironic given that BAWAG, in coordination with Refco, was a significant player in the PIPE (Private Investment in Public Equity) market. The PIPE market often act as a source of last resort role for small-cap companies in need of a capital infusion.
And, it turns out, one of the figures involved in with the BAWAG/Refco dealings in the PIPE Market, is the Austrian billionaire Martin Schlaff that will come up quite a bit in Ariel Sharon's scandals.
One of Schlaff's companies used in the PIPE market was Balmore, a British Virgin-Islands-based hedge fund. But Balmore has some other interesting history, as an investor in Xybernaut, a tech company that had George Allen on its board from form August 1998-Dec 2000. Like just about every corporation we're looking at here, Xybernaut's managers, "improperly used substantial company funds for personal expenses" and faces multiple class-action lawsuits. For more Balmore's role in Xybernaut, let's take at look at this Sept 2006 article from the American Prospect:
.... Starting in 2000, however, Xybernaut increasingly turned to a newly popular financial instrument to keep growing -- and going: so-called PIPE deals, short for “private investments in public equity.” In such deals, private investors are granted warrants or convertible debentures for stock at below-market rates in exchange for financing. All the investor has to do to make money is sell the stock. But some sleazy PIPE financiers go a step further by shorting the stock of the companies they finance, driving down share prices, diluting the shares of other investors, and even -- in a particularly egregious form of illegal short selling known as the “death spiral finance scheme” -- driving the company into bankruptcy through aggressive rounds of financing and short selling. Between March and November 2000, Xybernaut went from 1 percent to more than 15 percent owned by institutional investors who acquired their stock in the company through private deals, according to media reports.
“It really rode the Internet bubble, and it was real hot stuff,” recalls Gregory Sichenzia, of Sichenzia Ross Friedman Ference LLP, a law firm that specializes in securities and PIPE transactions, which he described as an increasingly traditional financing mechanism. “It’s not the fault of the financing that the company collapsed.”
Several firms that financed Xybernaut during Allen’s tenure on its board, however, have since been linked to a complicated international network of troubled financers and brokers. For example, in April 1998, Balmore Funds SA and Liechtenstein-based Austost Anstalt Schaan signed a private placement deal with Xybernaut granting the firm up to $11 million. One of their registrations of stock for sale came April 4, 2000 -- shortly after the March price peak and a period of unusually high volume trading, which was followed by yet another “going concern letter,” in mid-March, and a decline in the stock price. The signatory for Austost Anstalt Schaan was Thomas Hackl, who was from 1991 to 2002 head of treasury at BAWAG, the fourth largest Austrian bank (itself somewhat controversial for losing millions in the financing of Yasir Arafat’s casino outside Jericho). TheStreet.com has linked BAWAG to Austost and also to the hedge fund Alpha Capital Aktiengesellschaft, which invested in Xybernaut in 2001. Last year Hackl became a major figure in the collapse of Wall Street brokerage the Refco Corp., where he was executive vice president, in an accounting scandal that wiped out more than $1 billion in shareholder value. ... Despite the plethora of dubious characters surrounding Xybernaut, the true identity of many of the company’s financiers remains obscure. In the company’s heyday, its officers claimed to have the support of major Wall Street firms, but that was more hype. What SEC records show instead is that during the company’s 16-year history, it relied heavily on offshore firms for financing. And during Allen’s board tenure, it received the vast bulk of its money from outfits based in the most notorious havens for tax cheats and money launderers: the Turks and Caicos, the Cayman Islands, the British Virgin Islands, the Bahamas, Liechtenstein, and Israel. ...
So that's the interesting set up connections between BAWAG, Refco, Martin Schlaff, and George Allen. And if you're interesting a very long read on BAWAG, the Refco collapse, how this all relates to the Enron scandal, and the dangers associated with the unregulated explosion in the use of derivatives and hedge fund go here and here.
An Oasis of naughtiness Now let's move on and take closer look at the Oasis Casino in Jericho and it's complicated dealings with the BAWAG, Refco, and figures close to Ariel Sharon with this June, 2006 Bloomberg article:
Refco Bank Hid $1 Billion Loss From Hedge Funds, Arafat Casino
June 22 (Bloomberg) -- At the Israeli army checkpoint on the edge of Jericho, gamblers from Jerusalem and Tel Aviv streamed into the West Bank town to wager on blackjack, play poker and face off with slot machines at the Palestinian-run Oasis Hotel Casino Resort. The casino was open 24 hours a day, seven days a week.
The party that started in September 1998 ended when a Palestinian uprising scared away customers in October 2000, forcing the casino to close within a month.
The Israeli shells that punched holes in the Oasis's stucco- and-black-glass facade also struck a financial blow to one of the casino's investors, Vienna-based Bawag PSK Bank -- the same bank that backed Refco Inc., the New York-based brokerage that collapsed last October after belatedly reporting $430 million in hidden losses.
...
Drexel Burham Lambert, BTW, is where Cerberus found Stephen Feinberg got his start in the 80's. Skipping down in this lengthy and excellent article, we'll see how Martin Schlaff helped bring together BAWAG and Yasser Arafat in the Casino deal. Keep in mind that, as we're going to see, Schlaff is also a primary figure in the Ariel Sharon bribery scandal ...
... Risky Ventures Following the probe, Walter Flottl retired in 1995, handing the bank's leadership to Elsner. The new CEO expanded Bawag's relationship with Refco and started other risky ventures.
Elsner found such an investment in the Palestinian territories. Arafat, as president of the Palestinian Authority, was on the hunt for ways to develop the local economy after the 1993 Oslo Accord created the framework for Palestinian autonomy in the West Bank and Gaza, former Finance Minister Salam Fayyad says.
Austrian investor Martin Schlaff helped bring Bawag together with Arafat's advisers to build a casino in Jericho, according to Palestinian Authority records that list Schlaff as a board member and officer of the casino.
Schlaff was one of Bawag's biggest customers. Schlaff declined to answer written questions submitted to Michael Fink, his spokesman in Vienna.
On Dec. 17, 1996, Palestine Commercial Services Co., an investment company controlled by Arafat, signed an agreement with a group of Austrian investors, including Bawag, according to a report on the investment's history and financial value commissioned by the Palestinian Authority.
Oasis
The casino would be owned by CAP Holding AG, a Liechtenstein- based company whose shareholders were Bawag, with 11 percent; Vienna-based Casinos Austria International, with 16.5 percent; Palestine Commercial Services, with 23.1 percent; and a company called MS Privatstiftung -- controlled by Schlaff - - with 49.5 percent, according to Palestinian Authority and Casinos Austria documents.
Casinos Austria ran the Oasis, along with 62 other casinos in 17 countries and nine gambling ships.
...
Seven months later, on Sept. 28, violence erupted in Jerusalem as Ariel Sharon, then head of Israel's opposition Likud Party, visited the plaza that contains al-Aqsa Mosque, the third- holiest site in Islam, and the Western Wall, the most sacred location in Judaism.
Casino Closed
An uprising spread throughout the West Bank and Gaza, and in the following month, the casino closed. The hotel stayed open, with managers herding guests, including women and children, into the basement for hours at a time during gun battles.
...
With no customers at the gaming tables, the value of the casino plummeted. Still, Bawag engineered a transaction that -- for accounting purposes anyway -- transformed a stricken investment into one worth 120 million euros, Bawag's nonprosecution agreement says.
...
The article goes on to provide further details on the financial trickery employed to hide the BAWAG's losses in Oasis Casino.
Sharon's campaign finance fun Now we're going to move on, and take a look at Ariel Sharon's campaign loan scandal with this May 2004 Jpost article:
Sunday, May 9, 2004 Weisglass pushed Sharon to reopen Jericho casino Yaakov Katz The Jerusalem Post May 6, 2004
During negotiations with the Labor Party in October 2000 over the possibility of the Likud joining a national unity government, Ariel Sharon was asked by attorney Dov Weisglass, today his bureau chief, to speak with then premier Ehud Barak over the possibility of reopening the casino in Palestinian-controlled Jericho, The Jerusalem Post has learned.
The casino is jointly owned by the Palestinian Authority, Casinos Austria, the Austrian bank BAWAG, and Austrian-Jewish businessman Martin Schlaff, a key figure in the ongoing police investigation of the prime minister and his son, Gilad. "At the time I did not think anything was too strange with Weisglass's request, since at the time we knew that he was an attorney for the casino," said one of the participants at a meeting in October 2000 at the Sharon ranch. "But now, with the allegations that Sharon may have received bribes from Schlaff, the meeting and the request seem suspicious."
...
Following his victory in the 1999 Likud Party leadership primaries, Sharon went into debt to repay NIS 4.7 million in illegal campaign contributions. Gilad Sharon received a $1.5 million loan, originating in Austria, from South Africa-based businessman Cyril Kern in order to repay another loan the family had taken out in order to return the illegal donations. ...
The illegal campaign contributions in question funnelled to Sharon via Annex Research, a company set up in 1999 by Sharon's close aide Dov Weisglass in concert with Sharon's son, Omri. Weisglass also happens to be the lawyer for Martin Schlaff's investments in Israel as well as Casino Austria's Israeli investments. Weisglass was also reportedly in daily contact with Condoleeza Rice.
One of the fellows that is believed to be a funder Annex Research is Arie Genger. Genger acted as a private back channel between Sharon and the Bush administration, and also reportedly worked frequently with Condoleeza Rice.
Continuing...
... The police are investigating the possibility that Kern served as a front man for Schlaff, another friend of Sharon's, and a businessman heavily invested in Israel, who could have made the loan in the hope that Sharon would make decisions favorable to his business interests, including the reopening of the Jericho casino.
"We met to talk about whether Sharon should join a unity government with Barak, and Weisglass told Arik to pressure Barak into reopening the casino," the source said. "They agreed that if Sharon joined the coalition, then they would ease restrictions on the Palestinians in Jericho in order to inadvertently allow for the casino to reopen." ...
A quick summary The article goes on to provide many other details on this case, but let's just summarize some of what we've seen thus far regarding this Casino: So Martin Schlaff, and Austrian billionaire and friend of Sharon, invested heavily in a casino venture in Jericho along with Yasser Arafat. Another investor in the casino was BAWAG, the bank of the Austria trade unions that imploded in the joint Refco and embezzlement scandals. Both Schlaff and Casinos Austria were major investors in BAWAG.
Sharon's close adviser and chief of staff Dov Weisglass. Weisglass was also act involved in setting up some shell companies used to funnel campaign money to Sharon back in 1999. When Sharon was forced to pay back that money, he received a $1.5 million loan from a South African, Cyril Kern, that was believed to be acting as a front man for Martin Schlaff. The loan, with flowed through BAWAG accounts, is believed that the loan represented a bribe to encourage Sharon to allow the reopening of the Oasis Casino, which had been closed down due to the the second Intifada.
Oh, and Cerberus, the large hedge fund that is a major force in Israel's economy, recently bought BAWAG, which was put up for sale by the Austrian trade unions in order to cover their losses over the BAWAG/Refco twin implosions.
On a tangential note, while the involvement of Sharon's close aide in a business deal with Yasser Arafat may seem like an example of strange bedfellows, it's not quite as unusual an arrangement as one might think. Take, for example, Silvio Berlusconi, a major Bush backer and Iraq war supporter: His Swiss- investment adviser, Pier Felice Barchi, doubled as the lawyer for the al-Taqwa, the Muslim Brotherhood's bank! (More on that here) And then there's the GOP's own Muslim-Brotherhood-linked Get-out-the-vote operation.
So now that we're sort of caught up with all this, let's complicate it some more! Uncooperative Austria So, adding scandal to scandal, it looks like Austria's government may have jumped into the Sharon bribery game too!
Austrian MP Calls for Inquiry Into Sharon’s Vienna Dealings
Marc Perelman, With Reporting by Chemi Shalev in Jerusalem. | Fri. Aug 08, 2003
An Austrian lawmaker is calling for a formal inquiry into charges that Vienna is blocking an Israeli investigation of alleged campaign finance violations by Prime Minister Sharon — purportedly in exchange for Jerusalem’s agreement to restore diplomatic ties with the alpine nation.
...
Pilz said further investigations could be on the way. He said Justice Ministry officials had told him they were considering launching further investigations into allegations that the Austrian government had used money channeled via Austria to Sharon from a South African businessman, Cyril Kern, to influence Israeli policy. He did not specify what sort of influence his government might have been seeking.
...
Speculation has been rife in the Israeli press in recent days that Sharon agreed to restore ties with Vienna only after an Austrian judge rejected several requests from Israeli police to subpoena bank records related to the Sharon investigation. Israeli police have asked to see records of a possible transfer of funds from Vienna’s Bawag Bank to a Tel Aviv bank account owned by the prime minister’s sons.
An Austrian judge has twice rejected Israeli requests to examine the bank records. The first request was rejected because the Israeli request came in an incorrect format. The second was rejected on grounds that foreign campaign financing is not a criminal offense in Austria. There were reports that a third request had been made on Wednesday, but it could not be confirmed by press time.
...
Israeli newspaper reports have suggested that Justice Ministry officials connected to the far-right Freedom Party might have played a role in Austria’s rejection of the Israeli subpoena requests. Pilz noted that the rejection had come from a judge, not a ministry official.
... Sources in Jerusalem told the Forward that Sharon had been personally involved in calling for an upgrade of diplomatic relations with Austria. Moreover, the sources said, the decision was pushed by the political appointees within the Foreign Ministry rather than by the professional staff, which had allegedly rejected the restoration of ties last November and eventually acceded two weeks ago.
Israel downgraded its ties with Austria in 2000, together with members of the European Union, after the Freedom Party, then led by far-right activist Jorg Haider, was brought into the governing coalition. Haider has since resigned from the party leadership, leading European countries to restore ties. However, the Freedom Party remains in the coalition, which Israel had until last week cited as a reason for continuing the chill. Critics have called on the government to explain its shift. ...
Two years after these suspicions, the Austrian government launched a probe of the whole bribery affair, while asserting that it was the Israeli police that were lackluster in their pursuit of evidence. So now that it's all nice and extra confusing, let's add another figure to this whole mess.
Avigdor Friedman, a far-Rightist friend of Martin Schlaff While Mr. Schlaff may claim his investment in the Oasis Casino was intended to promote peace between the Israelis and Palestinians, his investment in Avigdnor Friedman probably doesn't fall in the category of peace-promotion:
Police probing Lieberman on suspicion of illegal business ties By Baruch Kra
The police have been conducting a lengthy inquiry into suspicions that Transportation Minister Avigdor Lieberman has an illegal business relationship with Austrian businessman Martin Schlaff, who has substantial business interests in Israel. ... Haaretz has learned that several years ago, during a special session of an Austrian parliamentary committee investigating that country's intelligence services, information came up regarding business connections between Martin Schlaff, the Austrian businessman who is believed to own 50 percent of the Jericho casino, and Lieberman, and how money was transferred to the political party Lieberman established, Yisrael Beitenu. ...
One of the main constituents for the Yisrael Beitenu party that Liberman formed are disaffected Likudniks that feel Likud just isn't right-wing enough.
In 2002, Lieberman called for the bombing of Palestinian gas stations, banks, and commercial centers in response to suicide bombings. In 2004, he pitched the "Lieberman Plan" that essentially involved complete separation of Arab and Jewish populations. In October 2006, Lieberman joined Ehud Olmert's cabinet in the position of "Minister of Strategic Threats", which was created primarily to deal with Iran's nuclear ambitions.
Along with Schlaff, another figure that has assisted Lieberman and his party is top GOP strategist Arthur Finklestein.
And perhaps most chillingly of all, Lieberman is seen as a rising star in Israel's politics:
... Far from his nakedly anti-Arab approach disqualifying him from the political mainstream, Lieberman is today its rising star. He was welcomed into the ruling coalition in October as "minister for strategic threats" and is now the main ally and crutch of faltering Prime Minister Ehud Olmert.
An immigrant from the former Soviet Union who lives in the illegal West Bank settlement of Nokdim, Lieberman is stoking anti-Arab sentiment and exploiting insecurity and disillusionment after the fiasco of last summer's Lebanon war. Top office, or at least the Defense Ministry, is a realistic goal for Lieberman, a shrewd political tactician who helped Benjamin Netanyahu gain election as Prime Minister in 1996 and served in Ariel Sharon's Cabinet. "If elections were held now, based on the polls, he could presumably be either prime minister or demand any other ministry he wanted," says Yossi Alpher, former director of the Jaffee Center for Strategic Studies.
If Lieberman's pronouncements are to be taken seriously--and there is no obvious reason they should not be--a Lieberman government would exclude some Arab citizens from Israel, would expel others who refuse to sign a loyalty-to-Zionism oath, would turn Gaza into Grozny and would execute Arab members of the Knesset who talk to Hamas or mark Israel Independence Day as the anniversary of the displacement of the Palestinians in 1948.
Many Israelis--and many Americans--are sleeping through the rise of Lieberman. Others are through their actions facilitating the ascendance of fascist ideas in Israel. Lieberman is more than kosher as far as Washington is concerned. Secretary of State Condoleezza Rice welcomed him at the State Department on December 11, a day after he was featured at a forum, sponsored by the Brookings Institution's Saban Center, that also included Bill Clinton, Senator Hillary Rodham Clinton and several other members of Congress. ...
So yeah, fascism appears to be on the rise in Israel as the public turns sour on corruption. Whoopy! And neither is Lieberman the only proto-fascist whose star is rising...
Arkady Gaydamak, a well-armed rising star now let's take a look at Israel's wannabe kingmaker:
My clout will make Netanyahu PM says Israel's wannabe kingmaker BEN LYNFIELD IN JERUSALEM
A RUSSIAN-BORN billionaire wanted by French authorities for alleged arms trafficking yesterday positioned himself as potential kingmaker of Israel by announcing a new "social movement" that will give expression to his growing political clout.
Arkady Gaydamak - who has gained a degree of popularity in Israel with a series of high-profile philanthropy projects amid deepening public disgust with established politicians - told The Scotsman last night that his "Social Justice Movement" would enable him to influence politicians without holding public office.
Mr Gaydamak, 54, says he does not have the experience or desire to hold high office. He says the person best suited to be prime minister is Benjamin Netanyahu, leader of the right-wing Likud party. ... A 2002 study by the non-profit Centre for Public Integrity, based in Washington, described Mr Gaydamak as "an entrepreneur with global ties to arms smuggling, resource exploitation and private military companies". ...
We should note that one of the conflicts in which Mr. Gaydamak sold his wares was the diamond-fueled Angolan civil war in the 90's. And while Gayadamak was selling his arms to the Angolan government, it was none of than arms-smuggler extraordinaire Victor that was selling to the UNITA rebels. (For more on the most mysterious and important Bout empire, go here and skip down to the section "What the arms trade is all about")
Continuing...
... Israeli analysts see Mr Gaydamek's alliance with Mr Netanyahu as a milestone in the country's politics. Approval ratings for the prime minister, Ehud Olmert, are plummeting after the debacle of last summer's Lebanon war and corruption scandals, while the right wing is rising in popularity. Mr Gaydamek, they say, can deliver to Mr Netanyahu a large chunk of the crucial Russian-speaking immigrant vote, while Mr Netanyahu can offer Mr Gaydamak access to the pinnacle of power.
"Gaydamek has huge resources and can buy up Israeli politics and politicians," says Danny Gutwein, a historian at Haifa University. "He will enlist the Russian vote for Netanyahu. Basically, capitalism will replace democracy." ...
Capitalism will replace democracy, eh? Its sounds kind of a like fascism. It also sounds in keeping with what's been taking place across in democratic countries across the world. But as this recent article suggests, Israel's march toward fascism and into the embrace of oligarchic right-wing ideologues just might happen sooner rather than later:
-05-07 Is Israel Falling Apart? By Dror Wahrman
Mr. Wahrman is Ruth N. Halls Professor of History and Director of the Center for Eighteenth-Century Studies at the Indiana University History Department (adjunct in English, Jewish Studies, Cultural Studies).
Foreign observers of Israel tend to focus so intently on the dangers the country faces from its Arab neighbors that they have largely missed an astonishing story that has been accelerating over the past few months: that of the Jewish state’s possible move toward internal collapse. If you consider this an exaggeration, just take note of what the past couple of weeks have brought about. A few days ago the chief of the Israeli police resigned after an investigation that found several of Israel’s highest police officers guilty of corruption and negligence. This came within a week of the forced resignation of Israel’s Chief of Staff from the military because of the fiascos of the second Lebanon war. It was also some ten days after Israel’s minister of justice was convicted of sexual assault while on duty, and a couple of weeks after Israel’s president – who holds a largely symbolic position – resigned temporarily following charges of rape and sexual misconduct. It was also the same day that the head of Israel’s tax authority resigned because of possible corruption charges. In the meantime, several other investigations are still pending, not least two or three directed at the Prime Minister himself, Ehud Olmert, concerning corruption and favoritism. And an appeal to the Supreme Court has already been filed against the minister of police’s choice for a new police chief – again, because of old charges of corruption of which the nominee had been acquitted only through a particularly narrow benefit of the doubt. ...
One of the corruption probes involving Ehud Omert just happens to involves charges of favoritism in the privatization of Bank Leumi while he was Minister of Finance.
Former Prime Minister Shimon Peres is also facing investigations over some campaign contributions from three foreign contributors, one of which includes Swiss business Bruce Rappaport. Mr. Rappaport also happens to have an interesting history with the Iran Contra, BCCI, and October Surprise affairs.
Continuing...
... Do these events really presage the collapse of the Israeli system of governance and democracy? There certainly has never been such a deep crisis of leadership in the country that touts itself as the only democracy in the Middle East. The leader of the ruling parliamentary coalition, Avigdor Yitzhaki, said so publicly a few days ago. And the Minister of Education has suggested that all schools devote special classes to the “government crisis”, so that children can speak out about what might well seem to them like a total collapse of all systems that control their lives. Suddenly the Palestinians and the Hizbullah, and even Iranian nukes, have taken a back seat: Israel does indeed seem in danger of imploding from within, at least as a viable democracy. ...
We're going to end this random walk through corrupt history with a couple more interesting links on the topic of the fascist elements in not only Israel's politics and a plug for a public radio fundraiser :-P.
The first link is to a one minute video clip by anti-fascist researcher Dave Emory on the topic of the fascist elements of Zionism. It's a excerpt from The First Refuge of a Scoundrel - The Relationship Between Fascism and Religion, a two hour talk on the topic of religion and fascism he recently gave. The video is available as part of the fund drive for WFMU, a non-commercial, freeform radio station broadcasting at 91.1 FM in Jersey City, NJ. If you tune in during the today (Tuesday, March 13), from 6-7 PM EST (which you can do online here), and make a $75 dollar donation to the station, you can a DVD of the talk thrown in as "swag". Yay!
And the second link is to another Dave Emory show from back in November of 1998, The Republican Party and International Fascism (audio here). It's a half hour show cover the GOP's very real history of working with fascists. It also discusses, ~18 minutes into the show, an interesting 1998 meeting of far- Rightists in Italy that include not only American far-Rightists, but Israeli far-Rightists. It's a useful reminder that, when we're talking about fascism and its history, we inevitably are talking about a larger global movement with cooperation that transcends borders and religions. Authoritarian thugishness, it appears, is a powerful unifying force.
Read entry | Discuss (10 comments) | Recommend (+15 votes) What happened to $100 billion in WWII Japanese loot? hint: it ties to Rev. Moon and the far-Right
Posted by ftr23532 in General Discussion (1/22-2007 thru 12/14/2010) Sat Feb 24th 2007, 09:35 PM
Consortium News has a new article out about the incredible amounts of gold and treasure looted from occupied Asia during WWII and how it shaped both post-war Japan AND the right-wing politics here in the US. While it isn't talked about much, it was decided by General McCarthy to use the loot to help finance the emergence of Japan's democracy. It also isn't mentioned to much that many of the key figures of Japan's WWII military government went on to because important post-war politicians in Japan's democracy. This same group has dominated Japan's politics ever since, reflected in the fact that almost every single Prime Minister since 1956 has been a member of the the LPD.
Japan's latest right-wing Prime Minister, Shinzo Abe, comes from a political family whose lineage includes Nobusuke Kishi. Kishi was one of General Tojo's closest deputies and a Class A war criminal as a result of his role as one of the top officials in the occupied Manchuria (where much of the war booty came from). He was imprisoned after the war, but but never tried by the International Military Tribunal for the Far East. In 1952, the attempts to purge Japanese of its WWII leaders was rescinded, and Kishi went about building the LPD, and in doing so "managed to maintain contacts with the mainstream while also connecting the non-zaibatsu business community and selected parts of the discredited prewar world of ultra-nationalist politicians and control bureaucrats (tosei kanryo) to the postwar conservative hegemony." Kishi then went on to become Japan's Prime Minister in 1957.
Kishi's formation of the LPD was also bankrolled by his allies Yoshio Kodama and Ryoichi Sasakawa, both of whom are major figures in the in the Japanese Criminal Underworld. Another organization that Kodama and Sasakawa helped bankroll just happens to be the good Reverend Sun Myung Moon's criminal enterprise. Both Kodama and Sasakawa also have long-standing ties to ultra-nationalist and fascist groups. They're good folks!
So that's some fun background history on Japanese politics. Now let's turn to this article on Consortium News and take a look at how $100 billion in hidden gold helped shape the post-war era, as well as our own politics here:
Why US Shields Japan's WWII Denials
By Jerry Meldon February 24, 2007
On Feb. 19, Japanese Foreign Minister Taro Aso took exception to a U.S. congressional resolution introduced by Rep. Mike Honda, D-California, calling on Japan to “formally acknowledge, apologize and accept historical responsibility” for coercing 200,000 Asian women into slavery as “Comfort Women” (wartime prostitutes) for 3.5 million Japanese soldiers. Mr. Aso said he considers the accusation groundless and extremely regrettable.
Six decades after World War II, can it really be that Japanese officials are still distorting history and insulting the Chinese, Koreans, Philippinos and others across Asia whom Hirohito’ s forces savagely brutalized and robbed?
And why does Washington turn a deaf ear?
The answers may be rooted in what transpired behind closed doors in Tokyo when Japan was occupied by the U.S. military in the post-war years .
Sterling and Peggy Seagrave suggest a motive in their eye-opening – and at times stomach-turning – 2003 book, Gold Warriors: America’s Secret Recovery of Yamashita’s Gold. In the war’s immediate aftermath, Gen. Douglas MacArthur, commander-in-chief of Allied occupying forces, secretly joined hands with Japanese war criminals. ...
For those interested, here's a rather lengthy review and overview of Gold Warriors: America’s Secret Recovery of Yamashita’s Gold by Chalmers Johnson.
And here's an interview with one of the authors of the book, Peggy Seagrave: FTR #428 "Gold Warriors"
Continuing...
... Rather than convict, imprison and throw away the keys, MacArthur coddled those responsible for one of history’s bloodiest wars of aggression. When the U.S. occupation ended in 1952, he released all those who were still in custody.
And it may have gone a lot further than that.
According to Gold Warriors, even as the United States “introduced democratic reforms and a new constitution … put Japan back under the control of men who were devotedly undemocratic … that Japan never stole anything and was flat broke … huge infusions of black money.”
Washington even had Article 14 of the 1951 Japan Peace Treaty state : “It is recognized that Japan should pay reparations to the Allied Powers for the damage and suffering caused by it during the war. Nevertheless it is also recognized that the resources of Japan are not presently sufficient … the Allied Powers waive all reparations claims of the Allied Powers and their nationals arising out of any actions taken by Japan.”
As historian Christopher Simpson put it , the United States thereby insured “that the vict ims of the war – rape camp survivors, slave laborers and POWs – be left with nothing.”
Furthermore, according to the Seagraves, “records of Japan’s looting and economic conspiracy have been removed from Western archives and databases, remain under secret classification and will not be made public for another half-century.”
The cover-up notwithstanding, the Seagraves somehow penetrated the veil of secrecy and reported that the source of the black money that MacArthur bestowed on the Japanese. They wrote that after arriving in Japan, the general’s aides located $100 billion in gold, platinum and other treasures that Hirohito’s forces had systematically plundered from occupied Asian nations and buried deep underground.
When MacArthur reported this to Washington, President Harry S. Truman’s brain trust – which included John McCloy, who as U.S. High Commissioner for Germany would authorize the early release of many Nazi war criminals – decided to devote the fortune to covert operations such as the bankrolling of rightist political parties and the recruitment of war criminals as U.S. intelligence agents for the Cold War that was just beginning.
...
It's worth noting that the GOP's Get out the vote "Ethnic outreach" groups targeting Eastern European communities involved a number of these fascist war criminals (Be sure to use the "search inside this book" option on Amazon...it's a must read book!). It's also worth noting that the GOP used convicted terrorist financiers to court the Muslim vote in Bush's 2000 election. Old habits die hard.
Continuing...
... One of the most notorious crooks MacArthur embraced was yakuza godfather Yoshio Kodama. With the exalted rank of rear admiral in the Japanese navy, Kodama had overseen the wartime looting of Asia’s criminal infrastructure. In the process, he stashed away a personal fortune estimated at $13 billion.
Arrested as a Class A war criminal, he made a deal with MacArthur’s intelligence chief, Gen. Charles Willoughby. Kodama handed the CIA $100 million in return for his release from Sugamo Prison. Returning to the underworld, he regained control of the Asian heroin traffic.
According to the Seagraves and others, he also remained a CIA asset until his death in 1984. It was apparently in that capacity that he became a major behind-the-scenes political force, primarily in Japan but, indirectly, across the Pacific as well.
Together with his fellow racketeer and Class A war criminal Ryoichi Sasakawa, Kodama underwrote the creation of two Japanese political parties that later combined to form the Liberal Democratic Party (LDP). Except for a brief hiatus when voters had had their fill of corruption, the conservative LDP has ruled Japan ever since. According to sources cited by the Seagraves, the LDP secretly contributed to the 1960 presidential campaign of Richard M. Nixon.
The LDP was not the only organization which Kodama and Sasakawa bankrolled, that lavished the gangsters’ ill-begotten wealth on American politicians. They also underwrote the Rev. Sun Myung Moon’s Unification Church, which owns the right-wing daily, the Washington Times.
...
Kodama and Sasakawa, together with followers of Rev. Moon, also underwrote the Asian People’s Anti- Communist League (APACL) as a propaganda mill for the dictatorships of Taiwan and South Korea. In 1966, the APACL expanded to become the World Anti-Communist League (WACL) . European neo-nazi terrorists and Latin American death squad leaders attended WACL conferences in the 1970s and 1980s. ...
Relating back to far-Rightist in the GOP, the leader of the US wing of Moon's World Anti-Communist League during the late 70's was a fellow named Roger Pearson, a British "racialist" that not only sat on the editorial board for the Heritage Foundation's Policy Review publication, but also played a prominent role in Mankind Quarterly, a "scientific" publication that provides "academic" research that is quite useful to those that want to prove, oh, that some races are inherently less intelligence than others (The Bell Curve made a number of reference to this publication). Much of the funding for Mankind Quarterly comes from the Pioneer Fund, which Pearson was also involved in (go here to see some interesting info on former director of the Pioneer Fund, Tom Ellis).
Here are two interesting interviews with author Kevin Coogan that have lots of info on Pearson and the larger fascistic network he was operating in: FTR 260: "Further Discussion with Kevin Coogan." FTR #312: Interview with Kevin Coogan, author of Dreamer of the Day
Continuing...
... Ronald Reagan – whose 1981 presidential inauguration was attended by the godfather of Central America’s death squads, Mario Sandoval Alarcon – sent the following message to the 1985 WACL convention in Dallas:
“I commend you all for your part in this noble cause. Our combined efforts are moving the tide of history toward world freedom. We must persevere and never falter. I send all you who help in your crusade for liberty my best wishes. God bless you.”
The previous year, Congress had blocked continued White House funding for the counter- revolutionary Nicaraguan contras. Undaunted, the Reagan administration solicited donations from private right-wing sources, including the two organizations that Kodama and Sasakawa had spawned. WACL and the Unification Church each obliged the Reagan team with generous donations that kept the contras afloat.
In that same period, WACL also contributed heavily in the United States to right-wing candidates running against progressive incumbents. One such beneficiary, WACL conferee Steven Symms, unseated the chairman of the Senate Foreign Relations Committee, Frank Church, D-Idaho. A prominent Vietnam War critic, Church had chaired a 1975 Senate investigation that uncovered CIA plots to assassinate foreign leaders.
Putting the pieces of the puzzle together, a picture emerges of CIA-controlled Japanese wartime loot being funneled by Japanese war criminals, via rightist Asian conduit organizations, to American politicians.
Maybe that explains why Washington turns a deaf ear when Japanese officials sanitize their country’s wartime atrocities. After all, the bruised feelings of a couple of billion Asian mainlanders is a small price to pay for keeping a lid on the truth.
Jerry Meldon is an Associate Professor of Chemical Engineering at Tufts University in Medford, Massachusetts. His e-mail is [email protected] .
For those interested, here's a very interesting Dave Emory show that includes info on how some of this war booty was used by folks associated with the John Birch Society to start developing a network private right-wing "security" firms (ie. the predecessors to Blackwater), that were instrumental in the Iran Contra affair: FTR #451 Petals from the Golden Lily Audio here.
Enjoy!
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Re: Christofascists, check out some of the stuff in the 1944 book "The Nazis Go Underground"
Posted by ftr23532 in General Discussion (1/22-2007 thru 12/14/2010) Fri Feb 09th 2007, 11:36 PM
I've just started looking through this fascinating out of print book, and there's quite a bit in there on the pro-Hitler far-Right Christian groups that were operating in this country at the time. It's pretty interesting. Here's the link to a pdf version of the The Nazis Go Underground but Curt Riess, which is one of many old out of print books on the history of fascism available on the site of anti-fascist researcher Dave Emory. Take a look.
There's a fair amount on groups related to Father Charles Coughlin and related pro-fascist Catholic groups (check out Chapter 8), but there's also some interesting info on how some Protestant Fundamentalists. And as Russ Bellant showed in both of his critical books The Coors Connection: How Coors Family Philanthropy Undermines Democratic Pluralism and Old Nazis, the New Right, and the Republican Party: Domestic fascist networks and their effect on U.S. cold war politics, the far-Right religious groups that comprised a key social component of the rise of the New Right in this country had deep ties historical ties to the larger menagerie of fascistic right-wing groups that supported Hitler and other fascists (BTW, both of those books by Bellant you can search through for free on Amazon, so be sure to use that feature!).
I thought this section (starting on p 118) from The Nazis Go Underground is quite telling about the cunning, and enduring, nature of the threat the modern world continues to face from extremist authoritarians:
... Shortly after Japan attacked us, between five and six hundred organizations with pro-Fascist leanings all over America went out of existence. That, at least, is what the record says. But a great number of new organizations came into existence. Not immediately after Pearl Harbor, of course, but pretty soon after, everything considered. They assumed different names. Judging from these names they had been founded to promote many completely different things. Their names would seem to indicate that the members were in the main businessmen who had become worried about the value of the American dollar; or mothers who were anxious that their sons soled have a fair break in the war and after the war; citizens whose one wish was to preserve the Constitution of the United States and safeguard the rights which it gives to all American citizens; clergymen who wanted nothing but to bring a sinful nation back into the fold of the Church.
But what's in a name?
The leaders of these new organizations and the men and women who are running them are, without a single exception, the leaders of the organizations which disbanded after Pearl Harbor. But why, then, did they dissolve their organizations? Wasn't it because it occurred to them that now, when America is a party to this war, the activities of their organizations, the very fact of their existence even, are illegal? This is, indeed, the only possible explanation. But if these organizations are illegal, how can it be anything but a fraud to revive them even though under another name?
Of course there are certain differences between the old organizations and the new ones. For instance, the members of no longer "Heil Hitler"--at the meetings, that is. But they are quite open in their isolationism, their anti-Semitism, their contempt for democracy. They fight racial equality and any form of world coopation. they say that Roosevelt is responsible for World War II, they want no part of the Four Freedoms. They don't want to feed the world after the war, but they are perfectly willing to feed Germany. And above all they are afraid of the "Communist danger." They think that President Roosevelt's re-election must be prevented at all costs, and that we should negotiation a peace with Hitler now, no matter what becomes of our Allies.
No, they don't "Heil Hitler openly. They are "American Nationalists." Before Hitler came to power in Germany there were a great number of "German Nationalists." In fact, the men in key positions who were influential in getting Hitler into power were not Nazis. They were just "German Nationalists."
The Nazis learned in 1933 that "Nationalists" are their best allies. They learned it again in Spain, where the "Nationalist Franco" was their friend; and again in Norway, where the "Nationalist Quisling" worked for them; and again in France, where the "Nationalist Pétain" collaborated with them.
What, from the point of view of a Nazi, is wrong with an American Nationalist? ...
If only they taught this stuff in high-school....
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That Boston story REALLY WAS was about acts of terrorism, and here's why
Posted by ftr23532 in General Discussion (1/22-2007 thru 12/14/2010) Fri Feb 02nd 2007, 01:56 AM
Oh, were you expecting a post on some terror charade involving cartoon food products? Sorry, this is about a different story coming out of Boston. It looks like the Justice Department might go 'Al Capone' style, and charge a Boston-based subsidiary of one of the central banks involved in terror financing with tax-evasion. As we'll see below, this could be quite significant. Here's the article:
Terror Inquiry Turns to Tax Law Efforts to Probe Financing Of Islamic Extremists Centers on IRS Violations By GLENN R. SIMPSON January 31, 2007; Page A3
The Justice Department is investigating possible criminal tax-law violations by a Boston private-equity firm that manages hundreds of millions of dollars for Muslim investors in Europe and the Middle East and is affiliated with a Swiss investment group U.S. authorities suspect of financing Islamic extremists.
Federal prosecutors disclosed a grand-jury probe of Overland Capital Group Inc. in filings last week with U.S. District Court in Boston. While the Boston grand jury is examining suspected tax evasion related to complex investment structures, the case is being handled by a prosecutor from the Justice Department's counter terrorism division, the filing states.
In the years since the Sept. 11 attacks, U.S. counterterrorism agencies have been stymied in several attempts to bring terrorism cases against wealthy individuals from the Middle East. Some prosecutors have pushed the government to use tax laws as a more effective approach, a method famously employed against gangster Al Capone in 1931. ...
One of the possible reasons it's been so hard to bring terrorism cases against wealthy individuals from the Middle East is that they've been hiring the most politically connected law-firms in the country to defend them.
Also, inter-agency infighting and turf wars were a big reason terror-financing investigations were thwarted, with the Treasury and Customs department frequently charging the FBI with thwarting their investigations. This was especially the case with the important "Operation Greenquest" task force started soon after 9/11 (although that was all 'fixed' when the Treasury and Customs got folded into DHS, at which point Chertoff transferred authority to the FBI and Operation Greenquest died a slow, bureaucratic death).
Continuing...
... Overland, which doesn't disclose its ownership, says on its Web site that it has made more than $1.5 billion in U.S. investments for its clients, largely in real estate, since its founding in October 2001.
Legal records say Overland is controlled by a Geneva-based financial group known as Dar Al-Maal Al- Islami Trust, which was founded by a senior member of the royal family of Saudi Arabia. The U.S. government is treating the companies as related: The Justice Department is examining "acts and practices" of Overland and a DMI subsidiary "that implicate potential violation of the Internal Revenue Code," the filing states.
DMI is the hub of a network of banks and investment funds across Europe and the Middle East that cater to Muslims interested in strictly following Quranic principles, such as a ban on collecting interest. Some DMI affiliates came under scrutiny by U.S. counterterrorism agencies in the mid-1990s for suspected connections to extremists, government records show. ...
DMI also happens to be a major shareholder in the al-Taqwa network, which is the primary financial vehicle for the Muslim Brotherhood. The Muslim Brotherhood is the god father of modern Sunni Islamist movements and the US has been working with them since the 50's (they were great anti-Communists). Muslim Brotherhood affiliated and/or inspired groups include Hamas, al-Qaeda, the Iraqi Islamic Party (the largest Sunni Islamist party in Iraq). Even the Iranian Revolutionary ayatollahs had ties to the Brotherhood (check out the part on the Devotees of Islam in this MoJo article). Al-Taqwa also has a number of connections to European far-Rightists (one of its directors is a neo-Nazi-turned-Islamist, for instance) . This entire DMI/al-Taqwa milieu has a heavy overlap with the DC-based SAAR network of charities, institutions and financial companies that was raided in March of 2002 as part of the Operation Greenquest terror-financing investigation. In addition, the SAAR network (now called the Safa Trust) is closely connected to Grover Norquist's "Islamic Institute", which was part of the GOP's Muslim voter outreach program, an important voter demographic in states like Michigan and Florida. Another figure involved with this network, like Talaat Othman, sat on the board of Harken Energy.
Continuing...
... In general, the U.S. and other Western governments are investigating whether terrorist groups are able to move money with help from sympathizers in the Islamic-banking movement. Intelligence and law- enforcement officials say they are concerned the industry's often-opaque practices lend themselves to money laundering and other financial crimes.
DMI officials have said the company has no involvement with terrorists or extremists. "We have never had any relationship with these kinds of people," said Mouaouia Mokhtari, DMI's director of corporate affairs. None of DMI's officials have ever been charged with terror-related offenses.
...
DMI and Overland are partners in a joint venture in Bahrain, and numerous corporate filings in the U.S. name DMI's chief executive as the president of various Overland-backed investment ventures.
Corporate and bank records show Overland has borrowed large sums from a DMI subsidiary, the Bahamas-registered Islamic Investment Co. of the Gulf Ltd. Legal records also describe DMI as an indirect 60% shareholder in Overland. Two former Overland employees also claim in a civil lawsuit that Overland is owned or controlled by DMI.
Overland identifies potential real-estate investments in the U.S., such as luxury condominiums and apartments, according to its Web site. Its investments include a stake in 30 rental units atop the Four Seasons Hotel in Houston. It then arranges for its clients to participate in these deals.
The nature of the tax inquiry isn't explained in the government's filings. But Overland's foreign backers have structured many of their U.S. investments through a network of shell companies in offshore tax havens such as the Cayman Islands, according to corporate and legal records.
Using such offshore companies, investors can structure their U.S. investments as loans instead of equity. That offers potential tax benefits because interest income to foreign investors is taxed far more lightly than profits from an equity investment. Such arrangements are legal, but only if they aren't primarily intended to circumvent Internal Revenue Service rules. ...
The al-Taqwa network also did much of its work out of a Bahamas-based subsidiary, Bank al-Taqwa, via a correspondent account with a major Swiss Bank that has a very interesting history. One of the reasons the Swiss investigation into al-Taqwa died was the withholding of evidence by the Bahamas. Interestingly, Bank al-Taqwa's lawyer, Sean Hanna, is the son of the Bahamas Governor General. Sean Hanna died unexpectedly six months after the investigation was closed.
Continuing...
... Dar Al-Maal Al-Islami (Arabic for "Islamic House of Finance") was founded in the early 1980s by Saudi Prince Mohammed Al-Faisal Al-Saud, a pioneer in so-called Islamic banking. Senior members of the Muslim Brotherhood, an international fundamentalist group, have held positions at various DMI affiliates, according to corporate records.
The Brotherhood, founded in Egypt in the 1920s, is the ideological inspiration for the terrorist groups al Qaeda and Hamas, but it now says it has renounced violence.
A DMI affiliate called Faisal Private Bank (Switzerland) SA, formerly known as Faisal Finance, has been named in two major terrorism probes. In one of these, the Justice Department alleges that Faisal Finance wired $665,000 to the account of a top Hamas leader, Mousa Abu Marzouk. (The source of those funds hasn't been disclosed.) ...
Mohammed al-Faisal is also an investor and board member of the al-Shamal bank, a bank that Osama bin Laden invested $50 million to help start. Al-Faisal's sister, Haifa, is the wife of Prince Bandar and has quite an interesting 9/11-related history of her own.
Continuing...
... In the same prosecution, the Justice Department alleges that in 1993, a Saudi businessman used Faisal Finance to transfer $30,000 to an alleged Hamas leader in Chicago named Muhammad Salah, who is currently on trial in Chicago on terrorism-related conspiracy charges. The same Saudi businessman, Yassin Qadi, also used Faisal Finance for a $1.25 million transfer to an alleged al Qaeda front company in 1998, according to legal and bank records.
Faisal Finance hasn't been charged with any crimes, but shortly after the Sept. 11 attacks, Mr. Qadi was named a "Specially Designated Terrorist" by the Treasury Department for alleged support of al Qaeda. Mr. Qadi has denied financing terrorists. Another Faisal Finance client, al Qaeda leader Mamduh Mahmud Salim, was convicted of conspiring to kill American citizens and is now in federal prison. ...
Yassin Qadi, an accused al-Qaeda financier that also bankrolled P-Tech. P-tech is a 'risk-assessment' firm hired by numerous government agencies to analyze vulnerabilities in their computer networks. Its clients included the FBI, DoE, the Air Force, NATO, the Navy, the FAA, the House of Representatives, and the White House (and that's just some of its clients). The FBI knew about P-tech's ties to Yassin al-Qadi and sat on it for a year before it was raided in October 2002. It's the kind of interesting relationship between these fellows and companies involved with national security that seems to continue to this day
Both Yassin Qadi and Mousa Abu Marzouk were targets of the "Operation Vulgar Betrayal" investigation at the center of FBI Whistle blower Robert Wright's complaints about pre-9/11 FBI high-level obstruction into the investigation of this network.
Continue...
... DMI and Faisal Finance are defendants in civil litigation in the southern district of New York brought by families of victims of the Sept. 11 attacks, who claim they funded al Qaeda. The firms have denied any involvement with terrorism.
A copy of the Justice Department filing was made available to The Wall Street Journal by Geoffrey Harper, a lawyer for a former Overland employee, Laird Fairchild. Mr. Harper said his client has provided information to the grand jury. Mr. Fairchild and another former Overland employee are in a legal dispute with Overland and DMI, claiming wrongful dismissal.
Write to Glenn R. Simpson at [email protected]
For a bit more on DMI's high-level and confusing connections, let's look at an excerpt from Kevin Coogan's must-read "Report On Islamists, The Far Right, And Al Taqwa":
... Prince Mohammad al Faisal al Saud is not only a pious Muslim but he belongs to the innermost circle of the Saudi dynasty as the son of the former King al Saud, cousin of the first rank to King Fahd and brother to the longtime head of the Saudi secret service, Prince Turki al-Faisal who stepped down in August 2001.
Since 1983 the Prince became in charge of the trust company Dar al-Mal al-Islami (DMI), founded two years earlier and which is based in Cointrin near Geneva. It has an estimated $3.5 billion dollars, the greatest part (according to the former DMI manager Ziad Keilaney) coming either from the private holdings of the King’s family or other wealthy Saudis. The DMI, along with the Saudi banking concern Dallah al-Baraka, is one of the most important sources for the spreading of Wahhabi ideas in Islam.
The DMI also controls the Islamic Investment Company of the Gulf, the Bahrain based Faisal Islamic Bank and the Geneva-registered Faisal Finance. The vice-president of Faisal Finance SA is a Somali named Omar Abdi Ali who is also to be found in the top management of DMI. DMI directly financed two "humanitarian" organizations, the International Development Foundation (IDF) and the International Islamic Relief Organization (IIRO).
In June 2000 the DMI completed the fusion of Faisal Islamic Bank and the International Investment Company to the Bahrain-registered Shamil Bank. A few months later the Shamil Bank opened its first foreign affiliate in Yemen. The Shamil Bank was 60% controlled by representatives of DMI in Nassau while the rest was from unknown private investors. The Shamil Bank held in turn 20% of the shares of the Arab Albanian Islamic Bank in Tirana. The bank employed at least one member of Al Qaida, an Egyptian named Ibrahim al-Jajjar, who in 1998 was involved in a planned assault on the American Embassy in Tirana.
Prince Mohammed al-Faisal al-Saud and his Somali top deputy Omar Abdi Ali are also represented in the highest management of the Shamil Bank. Another member is Haydar bin Laden, one of the many half brothers of Osama.
(At the beginning of 2001 the sister company of Faisal Finance was hit by the economic currency crisis and the collapse of the Turkish economy. In Geneva Prince Mohammed and his friends decided to get rid of the Turkish company. In May 2001 Faisal Finance was taken over by the Turkish big businessman Sabri Ulker and his USA-registered Islamic Finance group, American Finance House—Lariba and renamed Family Finance.)
...
Yeslam Bin Laden The French Swiss Lucien Rouiller was until 2001 not only an advisor to the DMI in Cointrin but he was also an advisor to Faisal Finance SA and the Faisal Islamic Bank. At the same time Rouiller was linked to the Geneva-registered MKS Finance SA owned by the Shakarchi brothers. In the 1980s Shakarchi Trading sent not just $25 million of CIA money to Afghanistan but also was involved in drug money for the Turkish mafia. For a time a member of the family was represented on the advisory board of Russell-Wood in London as well. And this complicated and many-branched business was the British branch of the Geneva-registered Saudi Investment Company (SICO). SICO was founded in May 1980 as the Swiss investment center for the bin Laden family under the name Cygnet SA and later renamed SICO. It belongs to the Swiss-based Yeslam bin Laden, one of Osama’s many half brothers. Yeslam has been zealous in promoting the idea that the bin Laden family has nothing to do with Osama. Yet Osama’s mother in the beginning of 2001 visited Afghanistan for an expensive marriage ceremony of her grandson (which was broadcast over al-Jazeera) and she speaks regularly on the phone to Osama. Another half brother of Osama’s, Sheik Ahmad, told CNN how much he admires Osama’s deep piety as well as his determination to achieve a goal. And more and more French and American experts are suspecting financial support from his family that has economic consequences. After 9/11 members of the Caryle Group (which includes George Bush Sr.) asked the bin Laden group to withdraw its investments. Also an investment of at least $20 million by the bin Laden group in a sister society of the Deutsche Bank in London was suddenly not welcomed. ...
And finally, to get a sense of just how interconnected so many of these issues are, let's look at this tid bit of interesting info in the sidebar of an article by money-laundering expert Lucy Komisar on the Clearstream affair:
Banking with Bin Laden
Following the September 11 attacks on the World Trade Center and the Pentagon, the United States started focusing its investigation on the financial trail of Osama bin Laden and the al-Qaeda network.
Like any other large, global operation, international terrorists need to move large sums of money across borders clandestinely. In November, U.S. authorities named some banks that had bin Laden accounts, and it put them on a blacklist.
One was Al Taqwa—“Fear of God”—registered in the Bahamas with offices in Lugano, Switzerland. Al Taqwa had access to the Clearstream system through its correspondent account with the Banca del Gottardo in Lugano, which has a published Clearstream account (No. 74381).
But bin Laden may have other access to the unpublished system. In what he calls a “spectacular discovery,” Ernest Backes reports that in the weeks before CEO André Lussi was forced to leave Clearstream last May, a series of 16 unpublished accounts were opened under the name of the Saudi Investment Company, or SICO, the Geneva holding of the Saudi Binladen Group—which is run by Osama’s brother, Yeslam Binladen (some family members spell the name differently).
Yeslam Binladen insists that he has nothing to do with his brother, but evidence suggests SICO is tied into Osama”s financial network. SICO is associated with Dar Al-Maal-Al-Islami (DMI), an Islamic financial institution also based in Geneva and presided over by Prince Muhammed Al Faisal Al Saoud, a cousin of Saudi King Fahd, that directs millions a year to fundamentalist movements. DMI holds a share of the Al Shamal Islamic Bank of Sudan, which was set up in 1991 and partly financed by $50 million from Osama bin Laden.
Furthermore, one of SICO’s administrators, Geneva attorney Baudoin Dunand, is a partner in a law firm, Magnin Dunand & Partners, that set up the Swiss financial services company SBA—a subsidiary of the SBA Bank in Paris, which is controlled by Khaled bin Mahfouz. Mahfouz’s younger sister is married to Osama bin Laden.
There's a lot more under the DMI/SICO/Clearstream/Shakarchi/drug-smuggling/money- laundering/terror-financing/far-Right rock but that stuff instead scary enough to drum up support for bombing Iran. So instead, we'll return to your regularly scheduled programming... Read entry | Discuss (27 comments) | Recommend (0 votes)
With Brownback in the race, now is a good time to remind ourselves of Opus Dei's influence
Posted by ftr23532 in General Discussion (1/22-2007 thru 12/14/2010) Sat Jan 20th 2007, 10:15 PM
With Brownback being an alleged Opus Dei member, we have another chance to highlight the fascists undercurrents in our political environment. So let's get started: -Here is a nice 2005 Washington Monthly article on the group. -Here is a Time Magazine article lists some of the suspected members which Opus Dei denies: Supreme Court Justice Antonin Scalia, almost-Justice Robert Bork, Senators Rick Santorum and Sam Brownback, Columnist Robert Novak and Former FBI Head Louis Freeh. FBI mole Robert Hanson was also a member, and even confessed his activities to Robert P. Bucciarelli, an Opus Dei priest (Bucciarelli alleged initially encouraged Hanssen to turn himself in, but then changed him mind and simply encouraged him to donate the money to charity).
Brownback's candidacy is also an excellent opportunity to remind folks about the deep political implications of the P-2/mafia/Vatican banking scandals in the early 80's because it was an Opus Dei- linked bank that bailed Banco Ambrosiano, closely tied to the Vatican Bank. -Here is a nice Time magazine article from 1981 on the fascist P-2 Lodge and its infiltration of the highest levels of the Italian government. -Here is a lengthy 1982 NY times article on the Banco Ambrosiano's implosion. -Here is a 1993 article in the National Catholic Reporter that gives more details on the Opus Dei bailout of Banco Ambrosiano. On a side note, the Swiss subsidiary of Banco Ambrosiano was Banca del Gottardo, which itself has close ties to the fascistic Muslim Brotherhood's al-Taqwa financial network. For example, al-Taqwa's lawyer is also the Swiss investment adviser for former P-2 member Silvio Berlusconi (more on that here)
Be sure to check out this excellent Dave Emory show that delves deeper into Opus Dei's fascist history and its ascendance within the hierarchy of the Catholic Church that took place under the reign of Pope John Paul II: -FTR #559 The Opus Dei Code – The Vatican Rag Pt. III Audio Here. -Here is an April 2005 Newsday article that discusses the ties between Pope Benedict and Opus Dei.
Interestingly, another right-wing reactionary Catholic group with deep ties around the world, the Knights of Malta, played a powerful role along with Opus Dei in getting Pope John Paul II appointed as Pope. -Here is an excellent 1983 Mother Jones article on that topic. Note the membership of folks Bill Casey and William F. Buckley in that group, along with former DOD IG (and now Blackwater's CFO) Joseph E. Schmitz.
-Here is an excellent 2005 Salon article on Brownback that highlights both his ties to the Koch family and his membership in the creepy "Christian" Fellowship Foundation. Here is more on the Fellowship Foundation. Be sure to note, at the end of that post, the involvement of the Fellowship Foundation with the utilization of ex-Nazis for anti-Communist efforts, as it ties into the GOP's various scandals of utilizing "ex"-Nazis (and some P-2 connected fascists) on their campaigns and in the building of the New Right in the 70's and 80's (More on that here and here).
Please post any other Brownback-related naughtiness and spread these links far and wide!
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Oh wow, looks like Bill Casey and William F. Buckley are members too!
Posted by ftr23532 in General Discussion (01/01/06 through 01/22/2007) Tue Dec 12th 2006, 10:21 PM
Check out this awesome, and quite long, MoJo article from 1983...it covers both the cooperative efforts of the Knights of Malta, Opus Dei, and the CIA's to keep the Catholic church opposed to its "liberation theology" of basically not supporting the poor get perpetually screwed over:
Their Will Be Done Let the pope keep the kingdom and the glory -- the CIA wants the power.
By Martin A. Lee
July/August 1983 Issue
One day in July 1944, as the Second World War raged throughout Europe, General William "Wild Bill" Donovan was ushered into an ornate chamber in Vatican City for an audience with Pope Pius XII. Donovan bowed his head reverently as the pontiff intoned a ceremonial prayer in Latin and decorated him with the Grand Cross of the Order of Saint Sylvester, the oldest and most prestigious of papal knighthoods. This award has been given to only 100 other men in history, who "by feat of arms, or writings, or outstanding deeds, have spread the Faith, and have safeguarded and cham-pioned the Church."
Although a papal citation of this sort rarely, if ever, states why a person is inducted into the "Golden Mili-tia," there can be no doubt that Donovan earned his knighthood by virtue of the services he rendered to the Catholic hierarchy in World War II, during which he served as chief of the Office of Strategic Services (OSS), the wartime predecessor to the Central Intelligence Agency (CIA). In 1941, the year before the OSS was officially constituted, Donovan forged a close alliance with Father Felix Morlion, founder of a European Catholic intelligence service known as Pro Deo. When the Germans overran western Europe, Donovan helped Morlion move his base of operations from Lisbon to New York. From then on, Pro Deo was financed by Donovan, who believed that such an expenditure would result in valuable insight into the secret affairs of the Vatican, then a neutral enclave in the midst of fascist Rome. When the Allies liberated Rome in 1944, Mor-lion re-established his spy network in the Vatican; fromthere he helped the OSS obtain confidential reports provided by apostolic dele-gates in the Far East, which included information about strategic bombing targets in Japan.
Pope Pius' decoration of Wild Bill Donovan marked the beginning of a long-standing, intimate relation- ship between the Vatican and U.S. intelligence that continues to the present day. For centuries the Vatican has been a prime target of foreign espionage. One of the world's greatest repositories of raw intelligence, it is a spy's gold mine. Ecclesiastical, political and economic informa-tion filters in every day from thousands of priests, bishops and papal nuncios, who report regularly from every corner of the globe to the Office of the Papal Secretariat. So rich was this source of data that shortly after the war, the CIA created a special unit in its counterintelligence section to tap it and monitor developments within the Holy See.
But the CIA's interest in the Catholic church is not limited to intelligence gathering. The Vatican, with its immense wealth and political influence, has in recent years become a key force in global politics, particularly with Catholicism playing such a pivotal role in Eastern Europe and Latin America. Unbeknownst to most Catholics, the Vatican, which carefully maintains an apolitical image, not only has a foreign office and a diplomatic corps, but also has a foreign policy. And with Polish Communists embrac-ing Catholicism and Latin American Catholics embracing communism, the U.S. government and particularly the CIA have recently taken a much greater interest in Vatican foreign policy. A year- long Mother Jones investigation has revealed a number of unlikely channels—both overt and covert— which the agency uses to bring its influence to bear upon that policy.
Since World War II, the CIA has:
* subsidized a Catholic lay organization that served as the political slugging arm of the pope and the Vatican throughout the Cold War; * penetrated the American section of one of the wealthiest and most powerful Vatican orders; * passed money to a large number of priests and bishops -- some of whom became witting agents in CIA covert operations; * employed undercover operatives to lobby members of the Curia (the Vatican government) and spy on liberal churchmen on the pope's staff who challenged the political assumptions of the United States; * prepared intelligence briefings that accurately pre-dicted the rise of liberation theology; and * collaborated with right-wing Catholic groups to coun-ter the actions of progressive clerics in Latin America.
It was in this last regard that the CIA supported factions within the Catholic church that were instrumental in pro-moting and electing the current pope, John Paul II, whose Polish nationalism and anti-Communist credentials, they thought, would make him a perfect vehicle for U.S. foreign policy. John Paul's recent trip to Nicaragua could not have been matched by any American's for the contri-bution it made to President Reagan's Central American initiative. And hopes are high in Washington, D.C., that the pope's forth-coming trip to Poland, where 90 percent of the people are Catholic, will re1 spark the anti-Soviet upris-ing so vital to Reagan's plans for Eastern Europe.
Dark Knight of the Soul
Every year in late June a bizarre ritual takes place in Rome. Men and women fly in from all over the world to participate in a cere-mony that has been performed for centuries. Next year, the assembled might find CIA director William Casey in their midst. And Casey could well be accompanied by former Secretary of State Alexander Haig.
If they make the journey, Casey and Haig will join a gathering of the world's Catholic elite on St. John's Day. Dressed in scarlet uniforms and black capes, brandishing swords and waving flags emblazoned with the eight-pointed Maltese cross, these Catholic brothers and sisters will, in an atmosphere of pomp and circumstance befitting a coronation, swear allegiance to the defense of the Holy Mother Church.
Casey and Haig are both members of the Knights of Malta, a legendary Vatican order dating back to the Crusades, when the "warrior monks" served as the mili-tary arm of the Catholic church. The knights, in their latter-day incarnation as the Sovereign Military Order of Malta (SMOM), are a historical anomaly. Although the order has no land mass other than a small headquarters in Rome, this unique papal entity holds the status of nation-state. It mints coins, prints stamps, has its own constitution and issues license plates and passports to an accredited diplomatic corps. The grand master of the order, Fra Angelo de Moj ana di Cologna, holds a rank in the church equal to a cardinal and is recognized as a sovereign chief of state by 41 nations with which the SMOM exchanges ambassadors.
But the real power of the order lies with the lay mem-bers, who are active on five continents. Nobility forms the backbone of the SMOM; more than 40 percent of its 10,000 constituents are related to Europe's oldest and most powerful Catholic families. Wealth is a de facto prerequi-site for a knightly candidate, and each must pass through a rigorous screening. Protestants, Jews, Muslims and di-vorced or separated Catholics are ineligible.
"The eight-pointed white cross stands out everywhere as a symbol of charity toward mankind and as a comfort and consolation to the sick and the poor," says Cyril Tou-manoff, official historian of the SMOM. In recent years its members have carried on the Hospitaler tradition of the original knights by supporting international health care and relief efforts. They proudly offer aid to the needy regardless of race, creed or religious affiliation.
But the needy aided by certain SMOM members in the late '40s were some of the 50,000 Nazi war criminals who, with the assistance of the International Red Cross, were furnished fake Vatican passports and, in some cases, cleri-cal robes, and were smuggled on Bishop Alois Hudal's "underground railroad" to South America. Among those was Klaus Barbie, the "butcher of Lyons."
In 1948, the SMOM gave one of its highest awards of honor, the Gran Croci al Merito con Placca, to General Reinhard Gehlen, Adolf Hitler's chief anti-Soviet spy. (Only three other people received this award.) Gehlen, who was not a Catholic, was touted as a formidable ally in the holy crusade against godless Marxism. After the war he and his well-developed spy apparatus—staffed largely by ex-Nazis— joined the fledgling CIA. Eventually, hundreds more Nazis ended up on the U.S. government's payroll. Among them was Klaus Barbie. ...
So like the fascistic Fellowship Foundation, we also have the fascistic elite Catholic order the Knight of Malta playing role in faciliating the Nazis' flight into the underground. And for those interested, you can go here for some info on how Klaus Barbie's eventual trial was financed by the same Nazi financier, Francois Genoud, that became an important figure in the postwar development of Middle Eastern terrorism.
Skipping down in the article, here's some more on the "American Section" of teh group:
... Amazing Grace
The American section of the Sovereign Mili-tary Order of Malta has about 1,000 mem-bers—including 300 "dames." They repre-sent the vanguard of American Catholicism, the point at which the Vatican and the U.S. ruling elite intersect. "The Knights of Malta comprise what is perhaps the most exclusive club on earth," Stephen Birmingharn, the social historian, has written. "They are more than the Catholic aristocracy... can pick up a telephone and chat with the pope."
And who are the American Knights? Mother Jones managed to obtain part of the secret membership list. On it we found some famil-iar names: Lee lacocca of Chrysler; Spyros Skouras, the shipping magnate; Robert Abplanalp, the aerosol tycoon and Nixon confidant; Barren Hilton of the hotel chain; John Volpe, former U.S. ambassador to Italy; and William Simon, who served as both treasury secretary and energy czar in the 1970s. At least one former envoy to the Vatican, Robert Wagner (the ex-mayor of New York), and the current emissary to the Vatican, William Wilson, are also members of the Knights of Malta. But there is one institution that stands out as the center of the SMOM in the United States—W.R. Grace & Company. J. Peter Grace, the company chairman, is also president of the American section of SMOM. No less than eight knights, including the chancellor of the order, John D.J. Moore (who was ambas-sador to Ireland under Nixon and Ford), are directors of W.R. Grace.
J. Peter Grace has a long history of involvement with CIA-linked enterprises, such as Radio Liberty and Radio Free Europe, which was the brainchild of General Rein-hard Gehlen. He is also the board chairman of the Amer-ican Institute for Free Labor Development (AIFLD), which has collaborated with multinational corporations and their client dictatorships in Latin America to squelch independent trade unions. Up to $100 million a year of CIA funds were pumped into "trustworthy" labor organi- zations such as AIFLD, whose graduates, according to AIFLD executive director William Doherty, were active in covert operations that led to the military coup in Brazil in 1964. During the early 1970s, Francis D. Flanagan, the Grace repre-sentative in Washington, D. C., was a member of ITT's "Ad Hoc Committee on Chile," which was instrumental in planning the overthrow of Salvador Allende. AIFLD's National Workers' Con-federation subsequently served as the chief labor mouthpiece for the Pinochet junta.
There are many other knights with CIA connections. Clare Boothe Luce, for example, the grande dame of American diplomacy, served as a U.S. ambassador to Italy in the 1950s and is now a member of the President's Foreign Intelligence Advisory Board, which oversees covert opera-tions. William Buckley, Jr., a former CIA operative and the editor of the National Review, is a member, as is his brother James, a former senator from New York and now undersecretary of state for security assistance.
...
So we have Lee Iacocca, a Nixon confidants, a Hilton, William F. Buckley, and J. Peter Grace on the members list too (Prescott Bush Jr. sits on the board of Grace's Americares, a past and presumably present CIA front. And for some interesting info on Radio Liberty and Radio Free Europe's use of Nazis and Nazi collaborators, there's some .
The next part of the article discusses gives a good example of how these types of transnational fraternities and orders unofficially wield their influence and allow the many different actors involved to coordinate with eachother:
... Targeting the Pope
The American section of the SMOM is one of the main channels of communication be-tween the CIA and the Vatican. Of course, neither party will acknowledge this. "The Knights of Malta is an honorific society of Catholics. That's all it is. ... It has no political function," asserts former CIA director William Colby, who declined an invitation to join the illustrious order. ("I'm a little lower key," he confessed.)
Technically speaking, Colby is correct; the knights do not have an explicit political function. They would never approach the Vatican with a message from the CIA. Nor would the Vatican ever openly ally itself with the political aims of the CIA. "Obviously, this is a dynamite type of proposition," explains Victor Marchetti. "I'm sure that in the clandestine area there was real consideration of how to influence the Vatican, but you'll never find a paper trail within the agency establishing an operational objective. A covert action of this sort is a very complex and sophisticated sort of thing...How much pressure the CIA would dare to exert on the Vatican is debatable. It would have to be done indirectly, on an informal basis."
This is where the American section of the SMOM fits in. "They all belong to the same club," says Marchetti. "One happens to be the director of the CIA, and another is a cardinal. When they get together and fraternize on a social basis, they exchange ideas and opinions as private indi-viduals. But how do you separate the private individual from the professional?"
During the 1950s and the early 1960s, relations between the U.S. and the Vatican were conducted largely through Francis Cardinal Spellman, the "Grand Protector and Spir-itual Advisor" to the SMOM's American wing. An ultra-conservative ideologue, Spellman served as the right arm of Pope Pius XII and was a vocal supporter of U. S. military involvement in Vietnam. ...
Much of the rest of the article discusses how the Knights of Malta and the CIAthwarted attempts to shift the Churches historical stance in South America away from the landowners and towards the poor, empowering Opus Dei within the Church heirarchy in the process. It's a worthwhile, not to mention terrifying, read.
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The Christofascist connections to the ISG
Posted by ftr23532 in General Discussion (01/01/06 through 01/22/2007) Sun Dec 10th 2006, 09:30 PM Folks familiar with the Fellowship Foundation, know as "the Family" by its members, are already aware of its secretive authoritarian theology that so many members of congress are part off. So it's worth noting that the founder of the ISG, Frank Wolf, is a "Family" member, as is fellow ISG member Ed Meese.
The semi-secret religious society of DC politicians is run by the "stealth Billy Graham" Doug Coe and hosts the National Prayer Breakfast every year. Here's some more on the group:
Jesus Plus Nothing Originally from Harper's Magazine, March 2003. By Jeffrey Sharlet. Sources
And a man's foes shall be they of his own household.
—Matthew 10:36
This is how they pray: a dozen clear-eyed, smooth-skinned “brothers” gathered together in a huddle, arms crossing arms over shoulders like the weave of a cable, leaning in on one another and swaying like the long grass up the hill from the house they share. The house is a handsome, gray, two-story colonial that smells of new carpet and Pine-Sol and aftershave; the men who live there call it Ivanwald. At the end of a tree-lined cul-de-sac, quiet but for the buzz of lawn mowers and kids playing foxes-and-hounds in the park across the road, Ivanwald sits as one house among many, clustered together like mushrooms, all devoted, like these men, to the service of Jesus Christ. The men tend every tulip in the cul-de-sac, trim every magnolia, seal every driveway smooth and black as boot leather. And they pray, assembled at the dining table or on their lawn or in the hallway or in the bunk room or on the basketball court, each man's head bowed in humility and swollen with pride (secretly, he thinks) at being counted among such a fine corps for Christ, among men to whom he will open his heart and whom he will remember when he returns to the world not born-again but remade, no longer an individual but part of the Lord's revolution, his will transformed into a weapon for what the young men call “spiritual war.”
...
Ivanwald, which sits at the end of Twenty-fourth Street North in Arlington, Virginia, is known only to its residents and to the members and friends of the organization that sponsors it, a group of believers who refer to themselves as “the Family.” The Family is, in its own words, an “invisible” association, though its membership has always consisted mostly of public men. Senators Don Nickles (R., Okla.), Charles Grassley (R., Iowa), Pete Domenici (R., N.Mex.), John Ensign (R., Nev.), James Inhofe (R., Okla.), Bill Nelson (D., Fla.), and Conrad Burns (R., Mont.) are referred to as “members,” as are Representatives Jim DeMint (R., S.C.), Frank Wolf (R., Va.), Joseph Pitts (R., Pa.), Zach Wamp (R., Tenn.), and Bart Stupak (D., Mich.). Regular prayer groups have met in the Pentagon and at the Department of Defense, and the Family has traditionally fostered strong ties with businessmen in the oil and aerospace industries. The Family maintains a closely guarded database of its associates, but it issues no cards, collects no official dues. Members are asked not to speak about the group or its activities. ...
And these are just the member and associates we know about. According to this interview of the author, he estimated it at about 20,000 members in the US. Skipping down in the article we're going to see how theocratic its theology is, and and the extent of its influence.
... At Ivanwald, men learn to be leaders by loving their leaders. “They're so busy loving us,” a brother once explained to me, “but who's loving them?” We were. The brothers each paid $400 per month for room and board, but we were also the caretakers of The Cedars, cleaning its gutters, mowing its lawns, whacking weeds and blowing leaves and sanding. And we were called to serve on Tuesday mornings, when The Cedars hosted a regular prayer breakfast typically presided over by Ed Meese, the former attorney general. Each week the breakfast brought together a rotating group of ambassadors, businessmen, and American politicians. Three of Ivanwald's brothers also attended, wearing crisp shirts starched just for the occasion; one would sit at the table while the other two poured coffee. ...
And here's Ed Meese, who replaced Giuliani on the ISG back in May.
Now check this quote out...
...
Tiahrt was a short shot glass of a man, two parts flawless hair and one part teeth. He wanted to know the best way “for the Christian to win the race with the Muslim.” The Muslim, he said, has too many babies, while Americans kill too many of theirs.
Doug agreed this could be a problem. But he was more concerned that the focus on labels like “Christian” might get in the way of the congressman's prayers. Religion distracts people from Jesus, Doug said, and allows them to isolate Christ's will from their work in the world.
“People separate it out,” he warned Tiahrt. “*+b'Oh, okay, I got religion, that's private.' As if Jesus doesn't know anything about building highways, or Social Security. We gotta take Jesus out of the religious wrapping.b”
“All right, how do we do that?” Tiahrt asked.
“A covenant,” Doug answered. The congressman half-smiled, as if caught between confessing his ignorance and pretending he knew what Doug was talking about. “Like the Mafia,” Doug clarified. “Look at the strength of their bonds.” He made a fist and held it before Tiahrt's face. Tiahrt nodded, squinting. “See, for them it's honor,” Doug said. “For us, it's Jesus.”
Coe listed other men who had changed the world through the strength of the covenants they had forged with their “brothers”: “Look at Hitler,” he said. “Lenin, Ho Chi Minh, Bin Laden.” The Family, of course, possessed a weapon those leaders lacked: the “total Jesus” of a brotherhood in Christ.
“That's what you get with a covenant,” said Coe. “Jesus plus nothing.”
...
Oh great, they practice a convenant styled after Hitler, Lenin, Ho Chi Minh, bin Laden, and the Mafia.
There's a lot more in that article about how they have to learn to submit to authority and how without the teachings of Jesus there's no reason for the strong not to enslave the weak (be sure to read the section on Coe's take on King David and Ghengis Khan because...OMGFTW). They even speak about their "Common Agreement as a Core Group" and how the Family members are instructed to form "cells", which is definated as "a publicly invisible but privately ientifiable group of companions", and being agents of Jesus that can do anything. In this interview of the article's author, he talks about their "Hitler Concept" (which seems to include plenty of Goebbels, and Nietzsche to boot):
... GNN: Define what they mean by Hitler Concept.
SHARLET: A loyal leadership cadre, which is interesting because guys like Hitler and Stalin were famous for purging, but they seem to focus on a couple of guys. "If two or three agree" is a phrase they use a lot. If you can get together and focus you can accomplish anything. You don't need to sway the electorate. You don't need to convert everyone to Christ. Everyone doesn't have to believe in Christ, and that's where they differ from other fundamentalists. Some fundamentalists really distrust them for that. "We need to convert everyone, the high and the low." The Family says, "No we don't need the high." All these guys Hitler, Lenin, Pol Pot and Osama bin Laden is another guy they cite a lot, are guys who understood the power of a political avant garde. That's what they mean by the Hitler Concept. Also keeping your message simple, and repeating it again and again because there is only one message and it is "Jesus Loves." You can express lots of different things with that term.
I always try to play the devil's advocate. They are not the traditional right wing bad guys. They have been able to do what they do for so long because no one has been looking for this kind of thing.
A lot of this is already in the culture, take "Ghengis Khan Business Secrets," for instance, the admiration authoritarian leaders.
GNN: Here's where I'm confused. To me they sound like Nietzsche. They don't sound like Jesus Christ. They sound like they are creating the Nietzschean superman above the moral universe the rest of us slaves live in.
SHARLET: I don't think I mention Nietzsche in the article, do I?
GNN: I don't think so.
SHARLET: That's really perceptive of you. Many of them love Nietzsche. They think he's fascinating. ...
Lovely folks, eh?
Now let's take a look at this 1974 TIME article, which talks about Gerald Ford's membership, along with Nixon's attorney Chuck Colson, and three other folks that went to prison over the Watergate scandal:
Monday, Aug. 26, 1974 The God Network in Washington
Just two days before becoming President of the U.S., amid the tense expectation of a Nixon resignation, Vice President Gerald Ford visited the office of House Republican Leader John Rhodes. What new political turn was being hatched, newsmen wondered, in this pivotal day of Ford's career? When the session was over the incredulous press heard that Ford had simply taken time out for a short prayer meeting with Rhodes, a Methodist, and a longtime Republican colleague from the House, Congressman Albert Quie of Minnesota, a Lutheran.
...
Satan's Power. The Ford group is only one of an intricate web of groups and individuals—almost an underground network—stretching well across religious and political boundaries, all of them part of a small but growing spiritual renaissance in Washington. It involves both those who have been hoisted to power through Watergate and those who were toppled by it. Quie, for instance, also prays with a Monday morning group that includes Senator Harold Hughes, occasionally Senator Mark Hatfield, and—from January to July—Charles Colson. When Colson went off to prison last month to begin serving a one-to-three-year sentence for obstruction of justice, he carried with him three Bibles and the promise that his prayer-group fellows would keep in touch.
...
While Hatfield moved up the political ladder to the governorship, his friend Coe broadened his evangelistic horizons to include political, professional and business leaders. In 1959 Coe left for Washington to join the staff of the International Christian Leadership movement, founded in the 1930s by Methodist Missionary Abraham Vereide to promote prayer breakfasts and personal evangelism among laymen.
Chuck Colson was Nixon's attorney from 1969-1973 and one of the "Watergate Seven". The article also lists James W. McCord, Jeb Magruder, and Bud Krogh, all of whom were part of the Watergate shenanigans.
Now let's take a look at this Abraham Vereide, the group's founder, and see how influential it's been over the decades. (From the Harpers article)
... The Family was founded in April 1935 by Abraham Vereide, a Norwegian immigrant who made his living as a traveling preacher. One night, while lying in bed fretting about socialists, Wobblies, and a Swedish Communist who, he was sure, planned to bring Seattle under the control of Moscow, Vereide received a visitation: a voice, and a light in the dark, bright and blinding. The next day he met a friend, a wealthy businessman and former major, and the two men agreed upon a spiritual plan. They enlisted nineteen business executives in a weekly breakfast meeting and together they prayed, convinced that Jesus alone could redeem Seattle and crush the radical unions. They wanted to give Jesus a vessel, and so they asked God to raise up a leader. One of their number, a city councilman named Arthur Langlie, stood and said, “I am ready to let God use me.” Langlie was made first mayor and later governor, backed in both campaigns by money and muscle from his prayer-breakfast friends, whose number had rapidly multiplied.<5> Vereide and his new brothers spread out across the Northwest in chauffeured vehicles (a $20,000 Dusenburg carried brothers on one mission, he boasted). “Men,” wrote Vereide, “thus quickened.” Prayer breakfast groups were formed in dozens of cities, from San Francisco to Philadelphia. There were already enough men ministering to the down-and-out, Vereide had decided; his mission field would be men with the means to seize the world for God. Vereide called his potential flock of the rich and powerful, those in need only of the “real” Jesus, the “up-and-out.” ...
In 1944, Vereide had foreseen what he called “the new world order.” “Upon the termination of the war there will be many men available to carry on,” Vereide wrote in a letter to his wife. “Now the ground-work must be laid and our leadership brought to face God in humility, prayer and obedience.” He began organizing prayer meetings for delegates to the United Nations, at which he would instruct them in God's plan for rebuilding from the wreckage of the war. Donald Stone, a high-ranking administrator of the Marshall Plan, joined the directorship of Vereide's organization. In an undated letter, he wrote Vereide that he would “soon begin a tour around the world for the , combining with this a spiritual mission.” In 1946, Vereide, too, toured the world, traveling with letters of introduction from a half dozen senators and representatives, and from Paul G. Hoffman, the director of the Marshall Plan. He traveled also with a mandate from General John Hildring, assistant secretary of state, to oversee the creation of a list of good Germans of “the predictable type” (many of whom, Vereide believed, were being held for having “the faintest connection” with the Nazi regime), who could be released from prison “to be used, according to their ability in the tremendous task of reconstruction.” Vereide met with Jewish survivors and listened to their stories, but he nevertheless considered ex-Nazis well suited for the demands of “strong” government, so long as they were willing to worship Christ as they had Hitler.
In 1955, Senator Frank Carlson, a close adviser to Eisenhower and an even closer associate of Vereide's, convened a meeting at which he declared the Family's mission to be a “worldwide spiritual offensive,” in which common cause would be made with anyone opposed to the Soviet Union. That same year, the Family financed an anti-Communist propaganda film, Militant Liberty, for use by the Defense Department in influencing opinion abroad. By the Kennedy era, the spiritual offensive had fronts on every continent but Antarctica (which Family missionaries would not visit until the 1980s). In 1961, Emperor Haile Selassie of Ethiopia deeded the Family a prime parcel in downtown Addis Ababa to serve as an African headquarters, and by then the Family also had powerful friends in South Africa, Nigeria, and Kenya. Back home, Senator Strom Thurmond prepared several reports for Vereide concerning the Senate's deliberations. Former president Eisenhower, Doug Coe would later claim at a private meeting of politicians, once pledged secret operatives to aid the Family's operations. Even in Franco's Spain, Vereide once boasted at a prayer breakfast in 1965, “there are secret cells such as the American Embassy the Standard Oil office to move practically anywhere.”
By the late sixties, Vereide's speeches to local prayer breakfast groups had become minor news events, and Family members' travels on behalf of Christ had attracted growing press attention. Vereide began to worry that the movement he had spent his life building might become just another political party. In 1966, a few years before he was “promoted” to heaven at age eighty-four, Vereide wrote a letter declaring it time to “submerge the institutional image of .” No longer would the Family recruit its powerful members in public, nor recruit so many. “There has always been one man,” wrote Vereide, “or a small core who have caught the vision for their country and become aware of what a 'leadership led by God' could mean spiritually to the nation and to the world. . . . It is these men, banded together, who can accomplish the vision God gave me years ago.” ...
So that's the Fellowship Foundation, your friendly neighborhood underground power-politics cult thing that embraces a "Hitler Concept". One has to wonder what types of "good Germans" Vereide picked after the war. Except we don't have to wonder too much, since there's been plenty of documentation about our use of "ex"-Nazis during the Cold War. Anti-Communism was an anything-goes free pass, and Western intelligence began utilizing the Nazis for a lot more than just scientific research. This was done in large part through the efforts of folks like Allen Dulles, who set up the CIA but was also played a similar role during WWII as Prescott Bush: doing business for and with the Nazis. Even the GOP's GOTV efforts began including Eastern Front fascist collaborators back in the 50's to get out the Eastern European ethnic vote in key states like Pennsylvania and Michigan and at least up through 1988, when George HW Bush was found to be using these same far-Rightists on his campaign. And this is just the tip of the iceberg when it comes to the New Right wing of the GOP dealing with fascistic groups for anti- Communist purposes. The Iran Contra effort was heavily promoted and supported here by groups like the Moonie-dominated World Anti-Communist League (WACL) that were filled with far-Rightists and neo-Nazis (who probably don't have much of a problem with the Family's "Hitler Concept").
And what's even more interesting, given their apparent admiration of Osama bin Laden, is that these guys aren't too different from the Muslim Brotherhood, which is kind of like the Family's Islamic ideological counterparts and which as also been the most influential group promoting the kind of Islamist ideology that we're apparently opposing in the War on Terror: The Muslim Brotherhood is a semi-secret religious society founded in Egypt the 1929. It was also strongly influenced by the fascistic ideologies of the day (its economic models are surprisingly corporatist, which is one reason it was great as an anti-Communist ally). The Brotherhood has a similar cell-like structure and drew primarily from the elite classes in Egypt and eventually elsewhere. It worked closely with the Nazis during WWII in opposition to the British Starting in the 50's, and maintained its ties with the Nazi diaspora after the war. The CIA also began working with the Muslim Brotherhood as part of our anti-Communist efforts in the 50's and continued to do so up through the 80's since the Muslim Brotherhood was heavily involved in the Afghan Mujahedeen support effort (here's some more on that topic]). Osama bin Laden's teachers were Muslim Brotherhood members since many fled to Saudi Arabia after Nasser cracked down on them in the 50's. Ever since, the Muslim Brotherhood and the Saudis have been working closely in expanding their influence in the Muslim world, and that includes right here in the US. It also includes working with the GOP (just ask Grover Norquist and Abramoff's buddy David Safavian who helped set up the GOP's muslim GOTV effort with Saudi/Muslim Brotherhood-run institutions).
So the founder of the ISG, the committee of wise old men that's going to salvage the Iraq debacle, happens to be a member an authoritarian underground network of apparent Christians that is strongly connected to the military-industrial complex, deals with dictators, and appears to be intent on quietly creating Jesus's Kingdom. And the members of this secretive group appear to heavily come from the GOP, a party that has a long, intertwined history with the primary Islamist group that promotes the authoritarian ideology (and provides substantial logistical support) for the militant groups that we're fighting in a never-ending "War on Terror". Fascist cultists fighting with their friendly fascist cultist counterparts and world is their pawns. That's just friggin' wonderful.
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Here's some more on that...
Posted by ftr23532 in September 11 Sat Dec 02nd 2006, 05:27 PM
Here's a gem from last year:
The Scotsman Mon 29, Aug 2005 Former police chief says Lockerbie evidence faked MARCELLO MEGA
CRUCIAL new claims that could free the Libyan convicted of the Lockerbie bombing have emerged via a retired Scottish police officer of high rank who has told lawyers that vital evidence was fabricated.
The revelation could represent the most dramatic breakthrough for the legal team acting for Abdelbaset Ali Mohmed Al-Megrahi since his conviction for mass murder in 2001.
The retired officer was a member of the Association of Chief Police Officers Scotland (ACPOS), and therefore achieved the rank of assistant chief constable at least.
He has supported the evidence provided to Megrahi's lawyers by a former CIA agent that senior figures in United States intelligence wrote the script to incriminate Libya for the bombing.
The Scottish officer's validation of the claim gives it a credibility it would not otherwise have had, given the senior rank he held.
Sources close to Megrahi's legal team have said the retired officer approached them after Megrahi's appeal, before a bench of five Scottish judges, was dismissed in 2002.
One source said: "He said he believed he had crucial information. A meeting was set up and he gave a statement that supported the long-standing rumours that the key piece of evidence, a fragment of circuit board from a timing device that implicated Libya, had been planted by US agents."
Asked why he had not come forward before, he admitted he had been wary of breaking ranks, afraid of being vilified. He also said that at the time he became aware of the matter, no-one really believed there would ever be a trial.
Dr Jim Swire, who has publicly expressed his belief in Megrahi's innocence, said it was right that all relevant information should be put to the Scottish Criminal Cases Review Commission. Dr Swire, whose daughter Flora was killed in the bombing, said: "It is in all our interests that areas of doubt are thoroughly examined."
And here's a 2001 another related story from the Sunday Herald:
Lockerbie: CIA witness gagged by US government
A FORMER CIA agent who claims Libya is not responsible for the Lockerbie bombing is being gagged by the US government under state secrecy laws and faces 10 years in prison if he reveals any information about the terrorist attack.
United Nations diplomats are outraged that the US government is apparently suppressing a potential key trial witness. Diplomats are now demanding that the CIA agent, Dr Richard Fuisz, be released from the gagging order. Fuisz, a multi-millionaire businessman and pharmaceutical researcher, was, according to US intelligence sources, the CIA's key operative in the Syrian capital Damascus during the 1980s where he also had business interests.
One month before a court order was served on him by the US government gagging him from speaking on the grounds of national security, he spoke to US congressional aide Susan Lindauer, telling her he knew the identities of the Lockerbie bombers and claiming they were not Libyan.
Lindauer, shocked by Fuisz's claims, immediately compiled notes on the meeting which formed the basis of a later sworn affidavit detailing Fuisz's claims. One month after their conversation, in October 1994, a court in Washington DC issued an order barring him from revealing any information on the grounds of "military and state secrets privilege".
When contacted by the Sunday Herald last night, Fuisz said when asked if he was a CIA agent in Syria in the 1980s: "That is not an issue I can confirm or deny. I am not allowed to speak about these issues. In fact, I can't even explain to you why I can't speak about these issues." Fuisz did, however, say that he would not take any action against a newspaper which named him as a CIA agent.
Congressional aide Lindauer, who was involved in early negotiations over the Lockerbie trial, claims Fuisz made "unequivocal statements ... to me that he has first-hand knowledge about the Lockerbie case". In her affidavit, she goes on: "Dr Fuisz has told me that he can identify who orchestrated and executed the bombing. Dr Fuisz has said that he can confirm absolutely that no Libyan national was involved in planning or executing the bombing of PanAm 103, either in any technical or advisory capacity whatsoever."
...
Lindauer says Fuisz told her CIA staff had destroyed reports he sent them on Lockerbie. Lindauer also refers in her affidavit to speculation that the USA ¬shafted any connection to Lockerbie away from Syria to Libya in return for its support during the Gulf war.
She added that Fuisz told her: "If the government would let me, I could identify the men behind this attack today. I could do the right thing … I could go into any crowded restaurant and pick out these men … I can tell you their home addresses … You won’t find anywhere in Libya. You will only find in Damascus. I was investigating on the ground and I know."
The 1994 gagging order was ¬issued following disclosures by Fuisz during other legal proceedings about alleged illegal exports of military equipment to Iraq. The order claims that the information held by Fuisz is vital to the "nation’s security or dip¬lomatic relations" and can not be revealed "no matter how compelling the need for, and relevance of, the information". The submission also makes clear that the government is empowered to "protect its interests in this case in the future", thereby gagging Fuisz permanently. ...
So Lindauer meets up with the CIA's man in Syria in 1994, makes a sworn deposition in court, and then and Fuisz gets gagged. And here's where things get weirder: Susan Lindauer was arrested in 2004 by US authorities for being an Iraqi spy:
Ex-Senate aide charged with giving Iraq secrets Indictment: Kin of White House chief of staff was paid agent of Iraq
NBC News and news services Updated: 6:19 p.m. CT March 11, 2004
A former news reporter and press secretary for four members of Congress was charged Thursday with being a paid Iraqi intelligence agent and trying to contact her distant cousin — the White House chief of staff — to alter U.S. policy.
Susan Lindauer, 41, was taken into custody in her hometown of Takoma Park, Md., and made a brief court appearance in Baltimore, where lawyers argued over whether she should be granted bail.
"I’m an antiwar activist, and I’m innocent," Lindauer told WBAL-TV outside the Baltimore FBI office. "I did more to stop terrorism in this country than anybody else. I have done good things for this country. I worked to get weapons inspectors back to Iraq when everyone else said it was impossible."
...
The indictment said she accepted $10,000 for working for the intelligence service from 1999 to 2002, including payments for lodging at the Al-Rashid Hotel in Baghdad and expenses during meetings in New York City with Iraqi agents.
According to the indictment, Lindauer delivered a letter "to the home of a United States government official" on Jan. 8, 2003, in which she described her access to members of dictator Saddam Hussein’s regime "in an unsuccessful attempt to influence United States policy."
The U.S. official was not identified. But federal sources told NBC’s Pete Williams that the official was Card, Lindauer’s second cousin. The sources said it was Card who alerted authorities to his relative’s activities. A government official, speaking on condition on anonymity, later told The Associated Press that Card was the recipient of the letter. ...
And here's where things get extra wierd: Lindauer was declared delusional and too incompetent to take the stand at her trial. In September of this year they released her, ruling that she couldn't be forcibly drugged in order to be make mentally sound enough to stand trial:
Ex-Congress Aide Accused in Spy Case Is Free on Bail By ANEMONA HARTOCOLLIS
A former journalist and Congressional aide accused of working with Iraqi intelligence before the war was released from prison yesterday after a federal judge ruled that she could not be forced to take antipsychotic medication in an effort to make her competent to stand trial.
The judge, Michael Mukasey of Federal District Court in Manhattan, said he was not convinced that even if she took the medication, the defendant, Susan P. Lindauer, 43, would improve enough to be capable of standing trial.
Judge Mukasey also criticized the strength of the government’s case, saying that the legal standard for forcibly administering medication requires a strong government interest in prosecution, and that the government has not been able to establish that standard in this case. The ruling was a setback for the government’s case against Ms. Lindauer, who was arrested in March 2004 at her home in Takoma Park, Md. An indictment charged that Ms. Lindauer, also known as Symbol Susan, conspired to act as an unregistered agent of the government of Iraq from October 1999 until February 2004, and engaged in illegal financial transactions.
Although he was reluctant to analyze the government’s case before trial, the judge said, "There is no indication that Lindauer ever came close to influencing anyone, or could have." The indictment, he said, describes an attempt to influence an unnamed government official as unsuccessful. ... At least a half dozen doctors for both the defense and the prosecution have found that Ms. Lindauer suffers from delusions of grandeur and paranoia, which makes her incompetent to stand trial, the judge said. But she refuses to accept the diagnosis or to take medication, he said. One doctor found that Ms. Lindauer had a history of psychotic episodes going back to her childhood, possibly at the age of 7, the judge said. These include her contention that she had gifts of prophecy that allowed her to report 11 bombings before they happened, that she spoke with divine inspiration and that she was an angel.
Among her paranoid delusions, doctors said, were the notion that she was being watched by hidden cameras in her apartment, that the Egyptian government had tried to assassinate her and that men next door had videotaped her under instructions from President Bill Clinton.
At a hearing before Judge Mukasey yesterday, prosecutors offered a backup plan, asking the judge to order Ms. Lindauer to either voluntarily take antipsychotic drugs for 30 days or be held in contempt. Contempt charges could be punished with jail time.
Judge Mukasey declined to rule on the prosecutor’s suggestion, saying that the case was being assigned to another judge and that he would leave that decision to her.
Meanwhile, he ordered Ms. Lindauer to be released under previously determined terms, including on bail of $500,000, on the condition that she receive psychological counseling and that her travel be restricted.
Her lawyer, Sanford Talkin, said she was released from the Metropolitan Correctional Center in Manhattan, where she has been held for the last few weeks.
Before that, she was in a federal prison hospital in Carswell, Tex. He said she would now return to her home in Maryland.
"She can’t go to trial until she’s competent," Mr. Talkin said. "I think it was a difficult decision, but I think it was the right decision, and I think it was a just decision."
Ms. Lindauer is a 1985 graduate of Smith College, where she majored in economics, and she received a master’s degree from the London School of Economics.
Her father, John Lindauer, was the Republican nominee for governor of Alaska in 1998.
Judge Mukasey also expressed humanitarian concerns about forcing Ms. Lindauer to take medication, which, he said, "necessarily involves physically restraining defendant so that she can be injected with mind-altering drugs."
Another an interesting side-note, in addition to being Andrew Card's second cousin, Susan Lindauer is also the daughter of Alaska's 1998 GOP nominee for governor, John Lindauer. John Lindauer came under fire and eventually lost the Alaska state GOP's endorsement for apparently refusing to answer the source of the large amounts of money he used to win the GOP primary. Those funds appear to have come from his wealthy wife and Edward A. Heil, a Chicago businessman whose company, eSafetyworld, was delisted and came under SEC scrutiny (an eventual charges)in the wake of the anthrax attacks for apparent stock fraud.
The Monzer al-Kassar Connection But getting back to the charges by the former CIA man in Syria, the lockerbie bombing also has potentially direct connections to the intertwined BCCI/Iran-Contra shenanigans, via Syrian arms- dealer/drug-smuggler extraordinaire Monzer al-Kassar. Here's a quick excerpt from the Walsh Report on some of al-Kassar's dealings with Enterprise company run Secord/Hakim/Zucker's team:
... Phases V-VII of the Contra Arms Sales (March-June 1986)
Between February 27 and May 23, 1986, the Enterprise paid Defex Portugal about $860,000 for contra weapons. Weapons were delivered to Central America in March, April and May in three shipments. CSF books show profit distributions between April and June, numbered Phases V through VII, totaling $550,471. In addition, there was an unnumbered distribution of $37,277 on June 20, 1986, resulting from the Phase VII shipment.
The Undelivered Shipment and Distribution (July-September 1986)
In July 1986, the Enterprise paid Defex (Portugal) $2.6 million and $500,000 to another dealer, Monzer Al Kassar, for contra weapons. In late July, a shipment of arms left Portugal for Central America aboard the recently acquired Enterprise freighter, the Erria.8 According to Thomas Parlow, the Erria's Danish shipping agent, the freighter was carrying arms picked up in Poland and Portugal.9 ... 51 The $3.6 million diversion estimate does not include expenditures OIC could not provide evidence for at trial but were, in fact, contra-related, including: the purchase of a $200,000 Jetstar by the Enterprise for contra-related travel; a $500,000 weapons purchase from Monzer Al Kassar, who was not available to testify; and about $535,000 that was used to purchase, operate and insure the Danish freighter, the Erria, which was not used exclusively for contra operations. ...
Now, according to John Loftus in his book The Secret War Against the Jews, al-Kassar was intimately involved with George Bush's Iran-Contra dealings, especially with regard to the negotiations with the kidnappers of the CIA's station chief in Lebanon Lt. Col. William F. Buckley. He also asserts that Monzer al-Kassar was, in the end, a double agent working for the Soviet military intelligence (via the Syrians), and helped totally play the Bush team "like a flute" while upping Buckley’s ransom for more and more weapons/policy shifts, etc (see Chapter 20 of The Secret War Against the Jews for lots on that topic).
Connecting this to the Pan Am 103 bombing, it appears that a US intelligence team led by Army Major Charles McKee that has stumbled across Monzer al-Kassar's drug-smuggling and Iran Contra links were on that flight. Check out this 1992 Time Magazine article that talks about al-Kassar’s links to the bombing, and the use of drug-smuggling techniques for doing it:
Time Magazine Monday, Apr. 27, 1992 Pan Am 103 Why Did They Die? Washington says Libya sabotaged the plane. Provocative evidence suggests that a Syrian drug dealer may have helped plant the bomb -- and the real targets were intelligence agents working for the CIA By ROY ROWAN
"FOR THREE YEARS, I've had a feeling that if Chuck hadn't been on that plane, it wouldn't have been bombed," says Beulah McKee, 75. Her bitterness has still not subsided. But seated in the parlor of her house in Trafford, Pennsylvania, the house where her son was born 43 years ago, she struggles to speak serenely. "I know that's not what our President wants me to say," she admits.
George Bush's letter of condolence, written almost four months after the shattered remains of Pan Am Flight 103 fell on Lockerbie, Scotland, on Dec. 21, 1988, expressed the usual "my heart goes out to you" sorrow. "No action by this government can restore the loss you have suffered," he concluded. But deep inside, Mrs. McKee suspects it was a government action gone horribly awry that indirectly led to her only son's death. "I've never been satisfied at ( all by what the people in Washington told me," she says.
Today, as the U.S. spearheads the U.N.-sanctioned embargo against Libya for not handing over two suspects in the bombing, Mrs. McKee wonders if Chuck's background contains the secret of why this plane was targeted. If her suspicions are correct, Washington may not be telling the entire story. Major Charles Dennis McKee, called "Tiny" by his Army intelligence friends, was a burly giant and a superstar in just about every kind of commando training offered to American military personnel. He completed the rugged Airborne and Ranger schools, graduated first in his class from the Special Forces qualification course, and served with the Green Berets. In Beirut he was identified merely as a military attache assigned to the U.S. Defense Intelligence Agency (DIA). But his hulking physique didn't fit such a low- profile diplomatic post. Friends there remember him as a "walking arsenal" of guns and knives. His real assignment reportedly was to work with the CIA in reconnoitering the American hostages in Lebanon and then, if feasible, to lead a daring raid that would rescue them.
McKee's thick, 37-page Army dossier contains so many blacked-out words that it's hard to glean the danger he faced. Surviving the censor's ink was his title, "Team Chief." Under "Evaluation," it was written that he "performs constantly in the highest-stress environment with clear operational judgment and demeanor . . . Especially strong in accomplishing the mission with minimal guidance and supervision . . . Continues to perform one of the most hazardous and demanding jobs in the Army."
...
Almost immediately after the Pan Am bombing, which killed the 259 people aboard the plane and 11 more on the ground, the prime suspect was Ahmed Jibril, the roly-poly boss of the Popular Front for the Liberation of Palestine-General Command (P.F.L.P.-G.C.). Two months earlier, West German police had arrested 16 members of his terrorist organization. Seized during the raids was a plastic bomb concealed in a Toshiba cassette player, similar to the one that blew up Flight 103. There was other evidence pointing to Jibril. His patron was Syria. His banker for the attack on the Pan Am plane appeared to be Iran. U.S. intelligence agents even traced a wire transfer of several million dollars to a bank account in Vienna belonging to the P.F.L.P.-G.C. Iran's motive seemed obvious enough. The previous July, the U.S.S. Vincennes had mistakenly shot down an Iranian Airbus over the Persian Gulf, killing all 298 aboard.
Suddenly, last November, the U.S. Justice Department blamed the bombing on two Libyans, Abdel Basset Ali al-Megrahi and Lamen Khalifa Fhimah. The scenario prompted President Bush to remark, "The Syrians took a bum rap on this." It also triggered an outcry from the victims' families, who claimed that pointing the finger at Libya was a political ploy designed to reward Syria for siding with the U.S. in the gulf war and to help win the release of the hostages. Even Vincent Cannistraro, former head of the CIA's investigation of the bombing, told the New York Times it was "outrageous" to pin the whole thing on Libyan leader Muammar Gaddafi. ...
According to Loftus's book, (p484-486), Bush made four secret trips to Damascus to negotiate Buckley release (even though he was already dead at that point but they didn’t tell the US), including one in 1988 right before Bush’s declaration that Syria got a "bad rap".
Continuing...
... A four-month investigation by Time has disclosed evidence that raises new questions about the case. Among the discoveries:
-- According to an FBI field report from Germany, the suitcase originating in Malta that supposedly contained the bomb may not have been transferred to Pan Am Flight 103 in Frankfurt, as charged in the indictment of the two Libyans. Instead, the bomb-laden bag may have been substituted in Frankfurt for an innocent piece of luggage.
-- The rogue bag may have been placed on board the plane by Jibril's group with the help of Monzer al-Kassar, a Syrian drug dealer who was cooperating with the U.S.'s Drug Enforcement Administration in a drug sting operation. Al- Kassar thus may have been playing both sides of the fence.
-- Jibril and his group may have targeted that flight because on board was an intelligence team led by Charles McKee, whose job was to find and rescue the hostages.
… Also described in the teletype is an incident that "may provide insight into the possibilities of a rogue bag being inserted into the baggage system." On a guided tour of the baggage area in September 1989, it was disclosed, detective inspector Watson McAteer of the Scottish police and FBI special agent Lawrence G. Whitaker "observed an individual approach Coding Station 206 with a single piece of luggage, place the luggage in a luggage container, encode a destination into the computer and leave without making any notation on a duty sheet." This convinced the two investigators that a rogue suitcase could have been "sent to Pan Am 103 either before or after the unloading of Air Malta 180."
...
The central figure emerging from the Interfor investigation is a 44-year-old Syrian arms and drug trafficker, Monzer al-Kassar. His brother-in-law is Syria's intelligence chief, Ali Issa Duba, and his wife Raghda is related to Syrian President Hafez Assad. …
That’s right, Monzer al-Kassar’s brother in law was Syria’s intelligence chief, and his wife was related to the Assad family too! But check this out, Carlos Menem, a Syrian born Peronist that was Argentina’s president throughout the 90’s, also had close connections to Monzer al-Kassar. For more on Monzer al- Kassar’s connections to Argentinian ex-president Carlos Menem, White Supremacists in Argentina’s military, the AMIA Jewish community center bombing, and the postwar Nazi underground (that community center had a lot of documents relating to the Nazis) check out show #109 (Parts 1 and 2. It’s pretty interesting stuff!
Continuing…
… Al-Kassar has many passports and identities. Most important, he was part of the covert network run by U.S. Lieut. Colonel Oliver North. During the Iran- contra hearings, it was revealed that al-Kassar was given $1.5 million to purchase weapons. Questioned about al-Kassar, former U.S. National Security Adviser John Poindexter said, "When you're buying arms, you often have to deal with people you might not want to go to dinner with."
It was through al-Kassar's efforts, or so he claimed, that two French hostages were released from Lebanon in 1986 in exchange for an arms shipment to Iran. The deal caught the eye of a freewheeling CIA unit code-named COREA, based in Wiesbaden, Germany. This special unit was reported to be trafficking in drugs and arms in order to gain access to terrorist groups.
For its cover overseas, COREA used various front companies: Stevens Mantra Corp., AMA Industries, Wildwood Video and Condor Television Ltd. Condor paid its bills with checks drawn on the First American Bank (account No. 2843900) in Washington, D.C., which was subsequently discovered to be a subsidiary of the Bank of Credit and Commerce International.
According to Aviv, agents in COREA's Wiesbaden headquarters allowed al- Kassar to continue running his smuggling routes to American cities in exchange for help in obtaining the release of the American hostages being held in Lebanon. At about the same time, al-Kassar's drug-smuggling enterprise was being used by the U.S.'s DEA in a sting operation. The DEA was monitoring heroin shipments from Lebanon to Detroit, Los Angeles and Houston, which have large Arab populations, in an attempt to nail the U.S. dealers.
By the fall of 1988, al-Kassar's operation had been spotted by P.F.L.P.-G.C. leader Ahmed Jibril, who had just taken on the assignment from Tehran to avenge the U.S. downing of its Airbus. A CIA undercover agent in Tripoli reported that Jibril also obtained Gaddafi's support. According to Mossad, Jibril dined with al-Kassar at a Paris restaurant and secured a reluctant promise of assistance in planting a bomb aboard an as yet unselected American transatlantic jet.
...
And skipping down in the article more, here’s some more interesting findings by corroborated by TIME’s investigators…
Precisely how a rogue bag containing the bomb eluded the Frankfurt airport security system, Aviv doesn't know. Presumably this required the help of baggage handlers there. So in January 1990 he and a former U.S. Army polygraphist flew to Frankfurt, accompanied by Shaughnessy. At the Sheraton Conference Center, adjoining the airport, the polygraphist administered lie- detector tests to Pan Am baggage handlers Kilin Caslan Tuzcu and Roland O'Neill. Pan Am had determined that they were the only ones who were in a position to switch suitcases and place the bomb-laden bag aboard Flight 103. Tuzcu took the test three times, and O'Neill took it twice. As the polygraphist later testified before a federal grand jury in Washington, Tuzcu "was not truthful when he said he did not switch the suitcases." The polygraphist also told the grand jury, "It is my opinion that Roland O'Neill wasn't truthful when he stated he did not see the suitcase being switched, and when he stated that he did not know what was in the switched suitcase." The two men continued to claim ignorance of a baggage switch. After flunking their lie-detector tests, both were sent on a bogus errand by Pan Am to London, where it was assumed they would be arrested. But British authorities refused to even interrogate the pair. According to Leppard, Tuzcu and O'Neill were simply "scapegoats" and were never "considered serious suspects." They returned to Frankfurt that same night. …
Check out Section "16" of Kerry’s BCCI report regarding unanswered questions due to a lack of cooperation by the Brits, including questions about Monzer al-Kassar’s use of BCCI for his drug- smuggling/arms dealing. Continuing…
If the bomb-laden luggage replaced an innocent bag, what happened to the displaced suitcase? On Dec. 21, 1988, the day of the bombing, one of Pan Am's Berlin-based pilots was about to head home to Seattle, Washington, for Christmas when he received orders to fly to Karachi first. He had with him two identical Samsonite suitcases full of presents. At the Berlin airport, he $ asked Pan Am to send them directly to Seattle. "Rush" tags, marked for Flights 637 to Frankfurt, 107 to London and 123 to Seattle, were affixed to the bags. It so happened that the flight from Berlin to Frankfurt was delayed. While all the passengers ultimately made the connection to London, 11 suitcases, including the pilot's two bags, remained behind in Frankfurt. They were entered into the airport computer system and rerouted via the Pan Am flight. But only one of the pilot's suitcases was recovered at Lockerbie. The other had been mysteriously left behind in Frankfurt, and arrived safely in Seattle a day later. That story, which TIME has corroborated, doesn't prove Pan Am's claim that terrorists used al-Kassar's drug pipeline to pull a suitcase switch in Frankfurt. But it does support the theory that a rogue bag was inserted into the automated baggage- control system, as the secret FBI report indicates was possible.
And further down in the article, here’s some more on the McKee team and their discover of Monzer’s CIA connections:
… In December 1988 al-Kassar picked up some news that threatened to shut down his smuggling operation. Charles McKee's counterterrorist team in Beirut that was investigating the possible rescue of the nine American hostages had got wind of his CIA connection. The team was outraged that the COREA unit in Wiesbaden was doing business with a Syrian who had close terrorist connections and might endanger their planned rescue attempt. Besides McKee, a key member of the team was Matthew Gannon, 34, the CIA's deputy station chief in Beirut and a rising star in the agency. After venting their anger to the CIA in Langley about al-Kassar, McKee and Gannon were further upset by headquarters' failure to respond. Its silence was surprising because Gannon's father-in-law Thomas Twetten, who now commands the CIA's worldwide spy network, was then chief of Middle East operations based in Langley. He was also Ollie North's CIA contact. MCKEE AND GANNON, joined by three other members of the team, decided to fly back to Virginia unannounced and expose the COREA unit's secret deal with al- Kassar. They packed $500,000 in cash provided for their rescue mission, as well as maps and photographs of the secret locations where the hostages were being held. Then the five-man team booked seats on Pan Am 103 out of London, arranging to fly there on a connecting flight from Cyprus. McKee's mother says she is sure her son's sudden decision to fly home was not known to his superiors in Virginia. "This was the first time Chuck ever telephoned me from Beirut," she says. "I was flabbergasted. 'Meet me at the Pittsburgh airport tomorrow night,' he said. 'It's a surprise.' Always before he would wait until he was back in Virginia to call and say he was coming home." Apparently the team's movements were being tracked by the Iranians. A story that appeared in the Arabic newspaper Al-Dustur on May 22, 1989, disclosed that the terrorists set out to kill McKee and his team because of their planned hostage-rescue attempt. The author, Ali Nuri Zadeh, reported that "an American agent known as David Love-Boy ((he meant Lovejoy)), who had struck bargains on weapons to the benefit of Iran," passed information to the Iranian embassy in Beirut about the team's travel plans. Reported to be a onetime State Department security officer, Lovejoy is alleged to have become a double agent with CIA connections in Libya. His CIA code name was said to be "Nutcracker." … In his book, Lockerbie: The Tragedy of Flight 103, Scottish radio reporter David Johnston disclosed that British army searches of the wreckage recovered more than $500,000 cash, believed to belong to the hostage-rescue team, and what appeared to be a detailed plan of a building in Beirut, with two crosses marking the location of the hostages. The map also pinpointed the positions of sentries guarding the building and contained a description of how the building might be taken. Johnston also described how CIA agents helicoptered into Lockerbie shortly after the crash seeking the remnants of McKee's suitcase. "Having found part of their quarry," he wrote, "the CIA had no intention of following the exacting rules of evidence employed by the Scottish police. They took the suitcase and its contents into the chopper and flew with it to an unknown destination." Several days later the empty suitcase was returned to the same spot, where Johnston reported that it was "found" by two British Transport Police officers, "who in their ignorance were quite happy to sign statements about the case's discovery." …
There’s lots more in that article and no doubt a lot more under the Monzer al-Kassar rock. Check out Dave Emory's For the Record show show #464 (streaming here) (specifically at ~17 minutes into the show) and show #510 (streaming here) for more on this topic.
Read entry | Discuss (1 comments) Some interesting info on the Refco implosion
Posted by ftr23532 in September 11 Mon Nov 27th 2006, 01:33 PM
Here’s an egregiously long post about the Refco implosion of last year and some related topics. This was originally going to be an additional post this thread involving the two topics of Blackstone and the buyout of Clear Channel by the Mitt Romney-founded Bain Capital and Thomas H. Lee Partners, but the post has sort of blown up in length into something that maybe warrants its own thread. There isn't anything that directly relates to 9/11 here, other than giving another example of the deep corruption taking place within many significant sectors of the world's financial systems and the important role that the futures market, and derivatives in general, have played in shaping the economy and modern financial fraud.
Refco was the leading US commodities futures trader when it imploded last year. The futures market has exploded in size in the last couple of decades and is a major force in the global economy. It is also a largely unregulated market and appears to be a tool of choice for financial shenanigans.
First off, let's take a look at the role commodities futures played in BCCI's money-laundering, via Capcom, with an excerpt from John Kerry's BCCI report:
... Capcom Operations
Capcom operated as a broker in the London and Chicago commodities markets. Commodities markets should be distinguished from the stock markets, which are more or less "cash markets" designed for "direct investment." As author Martin Mayer has explained, "you own what you buy and your success is a function of the success of the company in which you have purchased shares."(12) According to Mayer, futures markets, in contrast to cash markets, do not offer the investor the "commodity that underlies the activity." Mayer has written that futures investors:
"trade contracts to purchase or sell that commodity on a future date. The contract is inescapable. Those who purchase must stand ready to receive the commodity at a specified delivery point at this price on a specified date (or to buy an offsetting obligation from someone who has a contract to deliver to that point on that date, thus permitting the "clearing corporation" that serves the exchange to extinguish both contracts.) Those who sell futures contracts must stand ready to deliver the commodity to the delivery point for this price on the specified date (or buy in someone else's contract to accept delivery.) As a result future's markets are not situations where everyone can win.(13)
The commodities markets in the U.K. and the U.S. are not restricted, regulated or supervised as stringently as the banking industry or the securities markets.(14)
Moreover, the commodities markets can sustain almost limitless volume, a necessary prerequisite for crime on the scale of that contemplated by BCCI since fraudulent transactions may be hidden in a multitude of legitimate ones. In a letter to the directors, the Chairman of Capcom, Larry Romrell, reported that 165 million in trading during the first four months of operation, and profits of 883,393. That trend continued until 1988 leading Akbar to boast to agent Mazur: "We have contracted 165,000 contracts totalling $53 billion with Drexel Burnham," and later, "we have done over $90 billion total in 1988."(15)
While the number of contracts and dollar volume seems unbelievable, a commodities company can artificially create massive volume by many small or no-risk trading methods. Indeed, the volume generated by Capcom helped it to generate respectability and acceptance with reputable banks and brokers.(16) For example, listed under "Auditors and Advisers" in Capcom's 1987 Annual Report were the following major international banks: Manufacturers Hanover Trust Company, London, National Westminster Bank Plc, Manufacturers Hanover Trust Company, New York, Deutsche Westminster Bank, A.G., and National Westminster Bank, plc. Elsewhere, Capcom noted its ties to Dean Witter Reynolds, American Express Bank, Refco, Prudential Bache Trading Corp., and Sumitomo Trust and Banking, Ltd.(17) Like BCCI, Capcom attempted to buy legitimacy to assist its rapid expansion.
It’s not all that surprising for a number of reasons, including the fact that Refco was a major player in this market in the late 80’s. It’s also worth noting that the charges against Refco’s management following in 2005 don’t necessarily appear to a involve Capcom/Enron-style of fraud with criminal transactions being hidden as a needles in a haystack of the high-volume and complicated financial instruments (although, that could have easily taken place too given the nature of this industry). Instead, it appears to involve the more mundane hiding of massive debts via a series of offshore and complicit companies and faulty accounting, which can BCCI and Enron both had their fair share of too.
Now let's take a look at Thomas H. Lee Partners, the new co-owner of Clear Channel, and its involvement in the Refco debacle:
Crisis at Refco Raises Questions About Accounting
By Ben White and Terence O'Hara Washington Post Staff Writers Saturday, October 15, 2005; Page D01
NEW YORK, Oct. 14 -- Futures-trading firm Refco Inc. teetered on the edge of insolvency Friday, as scandal threatened to take down another major U.S. company, four years after the collapse of Enron Corp.
The rapid fall of Refco, which on Friday began shutting down one of its largest operating units, raised questions that many investors hoped were answered after accounting scandals at Enron, WorldCom Inc. and other big companies.
Among those questions was how such a long list of brand-name advisory firms could scrutinize Refco's books and not find the alleged fraud, which prosecutors have described as a scheme by former chief executive Phillip R. Bennett to keep as much as $545 million in bad debts off of the company's books, inflating earnings and bolstering Refco's stock price.
Bennett was arrested on Tuesday and on Wednesday was charged with stock fraud for allegedly misleading investors who bought shares in Refco's initial public offering in August. The company said Friday that it was beginning to shut down one of its main operating units, Refco Securities LLC. Refco's stock price has plunged because of the scandal, wiping out more than $1 billion in shareholder value. The company's bonds also have plummeted.
The rapid descent into scandal has embarrassed firms that advised Refco and signed off on its books, a group that includes public accounting firm Grant Thornton LLP, private equity firm Thomas H. Lee Partners and Wall Street investment banks Goldman Sachs, Credit Suisse First Boston and Banc of America Securities LLC.
A spokesman for Thomas H. Lee, the Boston-based private equity firm that helped bring Refco public and remains one of its largest shareholders, declined to comment on Friday, citing ongoing criminal and regulatory investigations and the possibility of shareholder lawsuits against Refco. Media representatives for Goldman, Credit Suisse and Banc of America also declined to comment.
But executives at several of those firms privately echoed the Grant Thornton statement, saying the alleged fraud was perpetrated at the highest level and was so well concealed that even diligent investigation could not have detected it.
Accounting and corporate-governance experts on Friday questioned that assessment. They said the alleged fraud appears to have been fairly straightforward. ...
The Refco implosion was also a pretty scary event at the time (like a mini-Enron) and it also sounds like there was more than just the hiding of debt taking place:
UPDATE 3-Former Refco CFO indicted on fraud charges Tue Oct 24, 2006 5:34 PM ET
(Adds comment from Bennett's lawyer)
By Anna Driver
NEW YORK, Oct 24 (Reuters) - The former chief financial officer at bankrupt brokerage Refco Inc.
Former CFO Robert Trosten is accused of helping Phillip Bennett, who was the company's chief executive officer, to hide from investors and auditors hundreds of millions of dollars in debt owed to Refco by a company controlled by Bennett, the U.S. Attorney's Office in Manhattan said.
He and Bennett are also accused of defrauding purchasers of $600 million in notes sold by Refco in 2004. That note sale was made in connection with Thomas H Lee Partners L.P. purchase of a majority interest in Refco.
Prosecutors also added new fraud charges against Bennett, who already faces accusations he hid $430 million of bad customer debt by shifting it to off-balance sheet entities each year from 1999 to 2005.
The revised indictment filed on Tuesday also charges Bennett with defrauding the purchasers of $583 million of Refco's common stock in its initial public offering in August 2005, prosecutors said.
The government said in court papers filed in April they had planned to expand their case against Bennett.
The Manhattan-based futures brokerage went into bankruptcy on Oct. 17, just a few months after its IPO and a week after it was disclosed it was owed the $430 million by Refco Group Holding, the entity controlled by Bennett. ...
Thomas H Lee Partners potential legal troubles over its role in Refco's IPO even popped up in June 2005 regarding its lack of disclosure to the SEC and potential investors about a $1 billion lawsuit filed against Refco in France.
In the end, though, it looks like Thomas H. Lee Partners, along with Refco's creditors, will be paid back quite a bit:
AP Refco Seeks Court OK of Settlement Friday September 8, 11:30 am ET Refco Seeks Court OK of $642M Settlement With Senior Lenders
WASHINGTON (AP) -- Refco Inc. has agreed to pay its senior lenders more than $642 million under a settlement the collapsed brokerage hopes will speed the conclusion of its bankruptcy case.
Refco said in papers filed Thursday in bankruptcy court that the deal with its lenders, led by Bank of America Corp., will help ensure there is enough money to pay its other creditors by cutting off interest on its bank debt, which has been accumulating at a rate of $6 million a month.
Judge Robert Drain of the U.S. Bankruptcy Court in Manhattan scheduled a hearing on the settlement for Sept. 27.
The proposed deal calls for Refco to pay its senior lenders $642 million, the amount the brokerage owed at the time of its Chapter 11 filing last October. Refco also has agreed to pay interest on the loan that accrued both before and after its bankruptcy filing, plus up to $13.5 million in lenders' fees.
In return, Bank of America will drop its claims based on allegations that Refco engaged in fraud when it provided the lenders with misleading financial information related to the loans.
In August 2004, Bank of America N.A., Credit Suisse Group and Deutsche Bank AG arranged $875 million in loans and a $600 million debt offering for Refco as part of a large investment made by Thomas H. Lee Partners LP, the Boston-based private-equity firm that helped take Refco public a year later. ...
Don't forget, these are the same financial giants that baffled observers with their inability to see this financial fraud in the first place. It sure pays to be diligently unaware!
Under the settlement, Refco has also agreed to turn over the cash it receives from Austrian bank Bawag P.S.K.
Bawag has agreed to pay $675 million for its role in Refco's collapse.
The proposed deal between Refco and its senior lenders is separate from the oft-delayed settlement involving Refco's cash-rich offshore unit, Refco Capital Markets Ltd.
Court approval of that settlement has been held up by squabbling among Refco's creditors over the ownership of the assets in RCM's possession. Marc Kirschner, the court-appointed trustee of RCM asked Judge Drain on Thursday to rule that about $2.4 billion held by the unit is exclusively the property of RCM.
Refco was once the largest independent commodity broker in the United States. It filed for Chapter 11 bankruptcy protection last October after a scandal over allegations that former Chief Executive Phillip Bennett had hidden hundreds of millions in bad debt.
Since then, the company has sold its flagship business to Man Group PLC's brokerage unit, Man Financial, and is in the process of winding down its remaining operations.
BAWAG So what's the deal with this BAWAG bank? It was merely at the heart of a major scandal that rocked Austrian politics this year:
Austrian Bank Scandal: When Socialists Play With Money From the desk of Chris Gillibrand on Tue, 2006-04-04 22:53
A major banking scandal is rocking the Austrian political elites – left and right. A bank owned by the Socialist trade union (which is close to the Socialist Party SPÖ, currently in opposition) loses billions in shady hedge deals while the union strike fund evaporates in the Caribbean and the bank gets implicated in a corruption case in Israel. Meanwhile the bank is financed by the European Investment Bank (EIB), and an Austrian Finance Ministry official (married to the Socialist ex-chief of the bank) ignores a crucial report and is appointed to the Executive Board of the European Central Bank (ECB). The Conservative Finance Minister claims to know nothing – after just having sold the Government- owned Post Office Savings Bank (PSK) to the socialist bank. Welcome to Austria, presently presiding the European Union council of ministers.
Let me introduce!
The Bank für Arbeit und Wirtschaft AG, BAWAG or in English, ‘Bank for Employment and Commerce’ was founded in 1922 by the Socialist Chancellor Karl Renner. Up until now the majority stakeholder in the Bank has been the Austrian Trades Union Federation, the ÖGB. With the repurchase of the shares of the Bayerische Landesbank in 2004, it is now wholly-owned by the ÖGB. The bank’s original intent, from which it has strayed far, was to extend cheap credits to the needy. ...
Looting a bank intended for the needy...yeah, that sounds like an apt example of the prevailing morality of our elites.
... Almost all of the members of the BAWAG Supervisory Board are fully paid up socialists and trade unionists. The two exceptions are Albert Hochleitner, the ex-CEO of Siemens Austria, and Leo Wallner, the chairman of the state-owned monopoly, Casinos Austria. Günter Weninger, chairman of the Supervisory Board, who has now been forced to resign, also has a day job as the Finance Chief of the ÖGB. He started professional life as an electrician which has given rise to suggestions in the Austrian press that he might have to return to his original trade. The Managing Board has eight members, four of whom have now resigned. The CEO, Johann Zwettler had already resigned in October 2005. He and his predecessor, Helmut Elsner, are now under police investigation.
BAWAG opened up operations in the Caribbean in 1995 under the direction of Wolfgang Flöttl, the son of the then CEO, Walter Flöttl. The idea was that these investments should hedge risk. When it was made public that the son received $2 billion from BAWAG without the father seeking the formal approval of the Supervisory Board, the Caribbean business got closed after a year. The extent of Supervisory Board knowledge is still questioned.
After the departure of Flöttl Senior, the business was then reopened by Flöttl’s successor, Helmut Elsner, with Supervisory Board approval after only one year. Elsner was already known as Flöttl’s “man for big business.” Living well, he enjoyed a service penthouse provided on the top of the BAWAG offices in Vienna as had his predecessor, Flöttl. Also provided with a penthouse was the head of the socialist trade union ÖGB, Fritz Verzetnitsch.
This time around, Flöttl Junior invested in high-risk funds and the business clocked up a massive loss of almost €1 billion which threatened the solvency of BAWAG in 2000. The Bank was only saved by a guarantee from the ÖGB (trade union dues amount to 1% of members salaries, so they have accumulated quite a lot of money to play with). The losses themselves were systematically covered up in offshore accounts in the Caribbean and accounts at a US futures broker called REFCO. The union strike fund went walkabouts as collateral in the Caribbean and disappeared.
On 1 December 2000, the Finance Minister (then and now) Karl-Heinz Grasser (from the ÖVP, the conservative Austrian People’s Party) commissioned the National Bank of Austria to do an audit of BAWAG. It was highlighted in the report that the banking system and national banking laws had been violated. There was neither mention of the losses in the Caribbean nor of the ÖGB guarantee. BAWAG received a copy together with the banking oversight authorities in the Finance Ministry. Grasser claims never to have seen a copy of this report.
Why were the Finance Ministry reluctant to expose themselves on this issue highlighted in this report? This could be explained by the fact that BAWAG were finally given clearance by the European Commission to acquire the Austrian Post Office Savings Bank (PSK) from the Austrian Government in November 2000. Not only did this acquisition give BAWAG a new client base (previously many of its banking products had been sold through the network of trade union branches and membership has been declining) but it gave BAWAG a needed liquidity at that time. The Austrian Government (consisting of the People’s Party ÖVP and Jörg Haider’s party) pocketed the money from the privatisation and all were happy behind the scenes. A total merger was finally achieved in 2004.
And the Austrian far-Right gets to play along too. Great.
However, the ignorance and inaction of the Finance Ministry is astounding given that there are two State Commissioners nominated to oversee the affairs of the BAWAG Group; for BAWAG, none other than the Chef de Cabinet of the Finance Ministry and for PSK, the Head of Directorate General III in the Federal Chancery.
No more audits were performed on BAWAG in the following years. Neither the Governor of the National Bank of Austria, Klaus Liebscher who is near to the Austrian People’s Party nor his Deputy, Gertrude Tumpel-Gugerell, who was responsible for financial market oversight thought them necessary. A separate Financial Market Oversight Authority (FMA) was set up in 2002. Finance Ministry staff were transferred to the FMA but not the incriminating report.
Gertrude Tumpel-Gugerell is herself “near” to the Socialist Party; so near in fact that her husband is Herbert Tumpel, President of the Chamber of Workers. Herr Tumpel has a past-life as Chairman of the Supervisory Board of BAWAG when the Flöttls were undertaking transactions under the codeword “Special Business.”
Frau Tumpel was Executive Director responsible for financial markets in the National Bank of Austria from 1997 to 2003 and was appointed Deputy-Governor in 1998. In 2002, she became a member of the Supervisory Board of the FMA on its establishment and Chair of the Banking Advisory Committee of the European Union. Already, a Member of the Banking Supervision Committee of the European Central Bank in 1999, she gave up all these posts to be a Member of the Executive Board of the ECB from 2003 onwards. She and five other members are responsible for the day-to-day running of the Eurozone, reporting to the Governing Council (the Executive Board plus the Governors of the National Central Banks). Why has no sound been heard from this direction?
The scandal breaks
BAWAG Caribbean ventures avoided the news until October 2005 when its former partner REFCO filed for bankruptcy. The 2004 Annual Report of BAWAG records: “The successful cooperation with the REFCO Group will be continued without an equity stake, so that the BAWAG PSK Group will continue to benefit from this access route to international customers in the future.”
In the event, what this really meant was a personal loan of $410 million to the CEO of REFCO, Phillip Bennett, only hours before the company went bankrupt. The collateral for the loan was REFCO shares which became instantly worthless. A warrant has been issued in Austria for Bennett’s arrest. Curiously, an arrest warrant for Flöttl Junior has just been withdrawn by an Austrian judge. ...
So BAWAG uses Refco to hide its losses, and then turns around and loans to Refco's CEO to hide Refco's own looting. Yeah, that sounds about right. And here's an interesting question: If Flottl Junior's owned a house in Bermuda, who might his neighbors be? And the answer: Ross Perot and Silvio Berlusconi.
When the extent of the exposure to the Caribbean business was made known in late March 2006 the Supervisory Board Chairman, Weninger resigned. At this stage the use of the strike funds as collateral was also discovered and trade union leader Fritz Verzetnitsch instantly resigned both as ÖGB Chairman and Member of Parliament.
BAWAG itself is so public minded that it has a representative on the Technical Expert Group of the EU’s European Financial Reporting Advisory Group. As the Bible says, you should not ignore the plank in your own eye when trying to remove the specks in other people’s eyes.
BAWAG always had the reputation of being a cutting-edge bank. Via REFCO, they were involved in the PIPE (Private Investment in Public Equity) market which was often used as finance of last resort for near bankrupt companies. They were the first bank in Europe to offer loans over the internet. While, over the years BAWAG showed considerable reluctance to enter the markets of Central Europe, outside the immediate scandal some of their strategic moves, have been what might be called “interesting” not to say “opportunistic.”
Check out this article for some more info on the PIPE market, and how BAWAG was a quiet major investor in at least four hedge funds that appear to be major players in the PIPE, which appears to be a market where companies in need of money look to private investors willing to buy shares in the company at discounted rates (it's another one of those "murky, yet booming" markets). Refco apparently worked closely with these four hedge funds, allowing them to resell their cheaply-acquired stocks.
... In Israel, there has been an extraordinary investment (among others) in a casino in Jericho, jointly funded by among others, the Palestine Authority, Casinos Austria and BAWAG. This was burned out during the Intifada but there appear to have been plans for another casino with the same ownership line-up in Southern Gaza! BAWAG is heavily involved in the still open corruption allegations against members of Sharon’s family. ...
Also note the involvement of folks like Solomon Obstefeld and Martin Schlaff in BAWAG's PIPE business.
Schlaff was another figure implicated in the Sharon corrupt scandal. Obstefeld was implicated (although not convicted) in the largest insurance fraud in US history: the looting of the National Heritage Life Insurance company for $450 million. The figures at the center of that scandal, Shalom Weiss, was eventually caught hiding out in Austria. One of the trading firms Mr. Weiss used, Pacific International, apparently had a number of mafia-connected clients.
It's also worth noting that penny stocks (and the shorting of them) appear to be a favorite mafia's activity on Wall Street. Because it involves selling shares to private investors at a discounted the price, the PIPE market is seen as one ripe for abuse via insider-trading and short-selling. A lot of these mob activities specifically favored penny-stocks (which are easier to manipulate), so it’s interesting that BAWAG's affiliated firm that dealt with the PIPE market, LH Financial, is a major player in the PIPE market and almost exclusively deals with penny-stocks.
... Stranger still, BAWAG opened a representative office in a hotel in Libya in October 2005, a strange enthusiasm even given the improving relations with the EU and the large number of other countries where BAWAG is not yet represented. The launch was attended by a delegation of twenty-five from Austria including none other than Ewald Nowotny, former socialist politician and vice-President of the European Investment Bank (EIB) from 1999 until 2003. He is now Honorary vice-President of the EIB. At the age of 29, he was appointed Chairman of the Board of Directors of the Austrian Post Office Savings Bank (PSK), a post he held until 1978.
The EIB is the EU’s financing institution. It was created by the Treaty of Rome. The members of the EIB are the EU Member States of the European Union, who have all subscribed to the Bank’s capital. In the EIB’s own words:
* The EIB enjoys its own legal personality and financial autonomy within the Community system. The EIB's mission is to further the objectives of the European Union by providing long-term finance for specific capital projects in keeping with strict banking practice. * It thereby contributes towards building a closer-knit Europe, particularly in terms of economic integration and greater economic and social cohesion. * As an institution of the Union, the EIB continuously adapts its activity to developments in Community policies. * As a Bank, it works in close collaboration with the banking community both when borrowing on the capital markets and when financing capital projects. * The EIB grants loans mainly from the proceeds of its borrowings, which, together with "own funds" (paid-in capital and reserves), constitute its "own resources". * Outside the European Union, EIB financing operations are conducted principally from the Bank's own resources but also, under mandate, from Union or Member States' budgetary resources.
The EIB has been extremely active in providing loans to BAWAG and to BAWAG/PSK.
It may be a coincidence but at the time of writing this article, records of the above loans have disappeared from the EIB website.
Of great curiosity value are what seems like two loans signed on 6 October 2005, just a few days before the REFCO scandal broke for €180 million – the first for €100 million for a global loan focusing “on projects of limited scale in the fields of environmental protection and improvement as well as infrastructure, energy, health, education and SMEs situated to more than 70% in regional development areas” and the second for €80 million “for financing for small and medium scale ventures.” It maybe that the second sum is included in the first.
Another loan for €20 million was signed on 17 March 2006 also for “financing for small and medium scale ventures.” It maybe that this loan is also the final tranche of the initial loan. Loans, therefore, of at least €100 million and possibly €200 million were made (depending on how one interprets the descriptions and dates of the transactions.)
A further line of credit for €100 million for “the financing of projects of limited scale in the fields of infrastructure, environmental protection and improvement, rational use of energy, health and education located in regional development areas” was published on 6 March 2006 as being under consideration.
Why such big loans so recently? On what basis did the EIB approve this financing? Did they not ask the Austrian Finance Ministry about the state of BAWAG’s finances? Why did not the Finance Ministry inform them? Surely even just the business in Israel and first news of the Caribbean scandal should have sounded alarm bells.
It can, therefore, be of no surprise that the new Chief Executive of BAWAG is going to be… Ewald Nowotny who declared on 23 March 2006 that “the bank’s balance sheet was now ‘clean and solid.’” He assures everyone that there are no more dead bodies in the cellar. ...
Yep, the European Union's financing institution, whose purpose is to "contribute toward the integration, balanced development and economic and social cohesion of the Member Countries", loves to lend to BAWAG. And Ewald Nowotny - an Austrian socialist politician that was also the VP of the EIB and a former Chairman of the Board of the PSK bank that was sold to BAWAG in a privatization scheme that enriched the Austrian far-Rightist government in 2004 - is now BAWAG's new CEO and wants to assure us it's all good in BAWAG's financial bowels.
... “Social partnership”
So cosy are the political relationships in Austria even after the partial collapse of the notorious proporz system that ex-People’s Party politician, Christoph Leitl, now the Head of the Austrian Chamber of Economics and President of Eurochambres declared that he had “respect” for trade union leader Verzetnitsch on his resignation. Short of a complete meltdown of BAWAG, it would have been in his interest to say this if any of his members are owing money to this socialist bank. Here they are together at a “Dialogue of the Social Partners” event organised by the Diocese of Linz in February. (see pic in article) Leitl has now praised the crisis management of the ÖGB und BAWAG! Needless to say, when questioned, he does not support the resignation of Tumpel from the Chamber of Workers.
Cosy indeed; the Austrian President, Prime Minister, Leitl himself and even the left-leaning Bishop of Linz were honoured guests among the 500 people who attended Verzetnitsch’s 60th birthday party in May 2005 (entitled “60 years for the Socialist Movement”!). The “Social Partners” collected €72000 for the newly established “Verzetnitsch Education Fund for Young People” by the end of the evening. Given the fate of the strike funds, one can only hope that this money is in safe keeping – but it was a BAWAG account. As their advertising runs, “BAWAG saving is safe, easy and lucrative.” Another advert more believably urges “Jet Set with Friends.”
Now the scandal has broken, the Socialist Party SPÖ is distancing itself from its old friends in the fly- by-night banking world. It has have been quick to support the sale of BAWAG, as it is a major embarrassment in the upcoming elections, which it had been predicted to win even under Alfred Gusenbauer, a leader who occupies a charisma free-zone all of his own. After all, if you run a Bank for your own interests and not those of your customers, you will treat the country and her voters in the same way. ...
So who ends up footing the bill for the whole Refco/BAWAG mess? The members of the Austrian trade union federation, whose sale of BAWAG may not even cover the debt its incurred over the fraud.
... Austria in truth has never recovered from the shock of the artillery bombardment of the Karl-Marx-Hof at the centre of “Red Vienna” in 1934 by the Christian Social conservative predecessors of the Austrian People’s Party. The elites now justify to themselves that they have to do everything to avoid such a crisis ever again, but a high price has to be paid in terms of corruption (or at least a good appearance of it) and contempt for a normal democratic process with an effective opposition. And the Austrian state presently has other threats than communists within. The time of the unbreakable “Social Partnership” of the Chamber of Workers (represented by Tumpel), the Trade Unions Federations (represented by Verzetnitsch) and the Chamber of Economics (represented by Leitl) should be long gone. Ironically, it is self-serving and no longer serves the interests of society or of ordinary Austrians outside the elites.
We are Europe
If the BAWAG affair comes to be seen as “business as usual in Austria,” Vienna could loose its place in banking as the mini-Frankfurt-on-the-Danube. Even as the BAWAG scandal broke, it was revealed that the Hypo Adria Alpe Bank has run up €328 million in losses in a mere two weeks of foreign exchange trading, prompting descriptions in the Austrian press of “third-world standards.” Surely this Austria is not the same country as the one holding the Presidency of the EU!
With the slogan “Youth can’t wait – We are Europe,” the ÖGB Youth Movement demonstrated outside the recent EU Youth Minister’s Meeting in Bad Ischl. You bet the Socialists can’t wait – after all Verzetnitsch started his climb to penthouse life within this same youth movement. In reality, Austria is an all too accurate mirror of the “social partnership” model that is also practiced by the European institutions.
And here's a bit more on the relationship between Refco and BAWAG...based on this Bloomberg article, it sounds like the Refco's infusion of BAWAG capital, not long after Phillip Bennett took over, allowed it to start gobbling up lots of other firms to become the largest commodity futures trader in the US:
... Bennett Takes Over
On Oct. 1, 1998, Dittmer named Bennett CEO. ``Phil brings to the job a bulletproof track record of sound decision making and a recognized financial stature,'' Dittmer said in a statement that day. Grant didn't return telephone calls seeking comment.
Bennett moved rapidly to burnish Refco's sullied image. In January 1999, he hired Dennis Klejna, who had served as the CFTC's director of enforcement from 1983 to 1995, as general counsel to police the firm. Bennett then hired Joseph Murphy from HSBC Futures Americas, a unit of London-based HSBC Holdings Plc, to run Refco LLC, the firm's regulated U.S. futures brokerage.
Klejna and Murphy wouldn't have tolerated the kind of rule breaking that had marked Refco's past, says Scott Early, general counsel at the CBOT from 1983 to 1994 and now in private practice at Foley & Lardner LLP in Chicago. ``Joe and Dennis were brought in with a clear mandate that this firm was going to be run in compliance with the law,'' Early says.
New Hires
Bennett's new hires pleased his regulators in Washington. ``People were hopeful that the company was getting the message and getting out of this cycle of running into regulatory problems every year,'' says Geoffrey Aronow, director of enforcement at the CFTC from 1995 to 1999 and now a lawyer at Heller Ehrman White & McAuliffe LLP in Washington.
With Klejna at his side, Bennett settled the Goldinger case, ending a four-year investigation. Klejna and Murphy both declined to comment.
Bennett also began hunting for new sources of capital to strengthen Refco. In 1999, he cemented an alliance with Vienna- based Bawag P.S.K. Bank, which is controlled by Austria's trade unions. Bawag bought 10 percent of Refco for an undisclosed sum.
Bennett was eager to show the futures industry that Refco was on solid ground. ``Getting that capital infusion was the first step in the process,'' says Cynthia Zeltwanger, CEO of Fimat USA. In 2004, Bawag sold its Refco stake for $220 million.
Acquisition Spree
Bennett also embarked on a series of acquisitions -- 16 in all -- that would eventually transform Refco into the largest independent U.S. futures brokerage and the fourth-largest in the world.
In January 2000, Refco bought Chicago-based Lind-Waldock & Co., the largest U.S. discount retail futures broker, for an undisclosed sum. In 2005, Refco spent $208 million to acquire Cargill Investor Services, the captive broker of the agricultural giant Cargill Inc., based in Wayzata, Minnesota. From 2000 to 2005, Refco's U.S. customer accounts almost doubled to $4.1 billion.
Bennett also pushed into overseas markets by acquiring Trafalgar Commodities Ltd., a London energy trading firm, for an undisclosed price, and MacFutures Ltd., a London firm that runs so-called electronic trading arcades, where traders are seated at machines rather than hollering at each other in a pit. In addition, Refco bought brokerages in India and Taiwan. By 2005, Bennett's firm had operations in 14 countries. ...
And here's a bit more from that article on Refco's regulatory history:
... The seeds of Refco's destruction were planted more than three decades ago, when the firm's co- founder, Ray Friedman, began fostering a culture of bending, and sometimes breaking, the rules. Refco had the worst record in the U.S. futures industry.
Since 1983, when Bennett became CFO, regulators such as the U.S. Commodity Futures Trading Commission had punished Refco 140 times for keeping sloppy records, filing false trading reports, inadequately supervising its traders and other violations, according to enforcement records compiled by the Washington-based National Futures Association, a self-regulatory organization that governs the more than 4,200 firms involved in futures trading in the U.S.
Tangling With Regulators
A key Refco unit that Bennett himself had established, Refco Capital Corp., tangled with the CFTC more than a decade before the brokerage foundered.
In 1994, the CFTC fined Refco $1.2 million for secretly shuttling money from client accounts to cover Refco Capital's own debts -- a forerunner of the toxic fraud prosecutors say Bennett later perpetrated as CEO. Refco paid that fine, without admitting or denying guilt, and promised to keep its hands off the money in such segregated accounts, which, under U.S. securities law, can't be mingled with a firm's own capital.
Refco failed to clean up its act. In 1995, a Refco broker helped a Beverly Hills, California, money manager named S. Jay Goldinger defraud his clients by illegally dealing out profits and losses among customer accounts, according to the CFTC.
The next year, Refco Capital, which Bennett had set up to finance customers' trades, once again manipulated a client's account without that customer's knowledge. A federal judge later ruled that that move, while technically legal, was nonetheless ``disreputable.''
Over the Edge
``Refco was a firm that said, `Show us where the edge is,' and then they played just over it,'' says a former U.S. commodities exchange official who was involved in regulating Refco during the 1980s and 1990s.
Prosecutors in Bennett's criminal case have focused on financial transactions between Refco and another, offshore unit, Refco Capital Markets LLC. The world of futures, options and other derivatives, which are instruments linked to underlying stocks, bonds or commodities, is split between those that are traded on exchanges such as the Merc and those traded off such bourses, or over the counter.
In the U.S., brokers of exchange-traded futures are regulated by the CFTC. Domiciled in Bermuda and operated out of New York, Refco Capital Markets brokered over-the-counter derivative and currency trades and was therefore beyond the reach of U.S. regulators.
`Fertile Ground'
``These unregulated parts of the industry offer fertile ground for fraud, manipulation and other shenanigans,'' says Randall Dodd, director of the Derivatives Study Center, a Washington-based research and policy group.
More revelations may be at hand. The CFTC is still conducting its investigation of Refco and its finances. The U.S. Securities and Exchange Commission is in the midst of its own, separate probe.
Refco's implosion and the charges leveled against its CEO have stunned investors and industry colleagues. Under Bennett, Refco appeared to have put its troubled past behind it, says Gary DeWaal, general counsel for Fimat USA Inc., the New York-based securities unit of Paris-based Societe Generale SA. Former Refco employees are staggered.
``It was like you just told me my brother is an ax murderer,'' says Daniel Yovich, 42, a former Refco grain futures broker on the Chicago Board of Trade who quit Refco after the firm went bankrupt. ...
And here's an article giving a possible motive for Bennett's rather brazen fraud:
Matthew Goldstein Refco and the IPO Motive By Matthew Goldstein Senior Writer 10/21/2005 4:18 PM EDT
One of the hardest questions to answer in the Refco (RFX:NYSE) scandal is why Phillip R. Bennett, a Cambridge-educated master trader seemingly assured of a lucrative Wall Street career, would want to cook the books at a company he helped build.
Federal prosecutors, in charging the former Refco CEO with securities fraud, suggest Bennett's main motive in hiding some $430 million in uncollectible debts was the brokerage's initial public offering in August.
But Bennett's alleged deception goes back as far as 1998, years before Thomas H. Lee Partners sank $507 million into Refco and set the stage for its $583 million IPO.
Unless Bennett is a soothsayer, it's hard to imagine he could have known the Boston-based buyout firm would knock on his door in 2004. But an examination of the record suggests that some type of public sale of Refco stock was on Bennett's mind when his plot allegedly began to form.
Indeed, as early as 1999, a year after Bennett allegedly began the scheme to burnish Refco's balance sheet, there was a talk on Wall Street about a Refco IPO. The speculation was spurred, in part, by the decision of Austria's Bank Fur Abeit und Wirtchaft, or Bawag, to take a 10% equity stake in the New York brokerage that year.
Bawag sold its interest when Thomas H. Lee Partners entered the picture in 2004. The bank surfaced again this week when it acknowledged it lent Bennett the money to pay off his $430 million debt to Refco. Bawag's involvement in the Refco mess has led to calls for an investigation from some Austrian politicians.
The possibility of an IPO got more momentum when Thomas Dittmer, Refco's longtime chairman, stepped down in December 1999 and turned over the reins to Bennett. Until then, Dittmer, having invested about $100 million, had a 51% equity stake in Refco, a firm he had led for 20 years. The other equity owners were Bennett, former Refco president Tone Grant, and Bawag.
Under Dittmer's stewardship, Refco grew from a small commodities brokerage into an international powerhouse. Shelly Jacobs, a former Refco broker, says Dittmer was the "glue that held the whole place together.''
But Dittmer, who took over Refco from his stepfather, Ray E. Friedman, was also a controversial figure. It was during Dittmer's tenure that the brokerage paid an $8 million fine to settle charges that it had helped manipulate customer accounts. The fine assessed by the Commodity Futures Trading Commission in May 1999 was hefty at the time.
Dittmer's departure was seen by many on Wall Street as part of an effort by Refco to clean up a renegade image. A number of other management changes were effected around this time. In setting with the CFTC, Joseph Murphy, who had just joined Refco as its new president, said, "Refco has begun the process of putting any issues with federal regulators or futures exchanges behind us.''
Refco executives were less vocal about the terms under which Dittmer left the company. A trade publication, Securities Week, reported in December 1999 that Dittmer's separation agreement included a provision that afforded him a lucrative post-departure payout in the event Refco ever went public or was bought.
In its IPO registration statement, Refco reported that within the past year it made an $861.7 million payment to a "former shareholder'' for sale of an interest in the predecessor company. Refco has not identified the shareholder. The payout was reported Friday by the New York Post, though the newspaper said the recipient remains a mystery. ...
If Dittmer was the recipient of the $861.7 million payout, that would come in handy since he declared his plans to return Wall Street just weeks after Refco's collapse.
... If Dittmer received the money, the payout would cast an interesting new light on Bennett's possible motivation for allegedly concealing the bad debts on Refco's books. At the very least it would help explain why Bennett was worried about the appearance of Refco's books at a time when the company was still seven years away from an IPO.
"There is no question if these were credit loses that would have definitely reduced the performance of the firm,'' says Peter Nerby, a senior credit officer with Moody's Investors Service. "That would have affected how we would have viewed the creditworthiness of the company.''
A Refco spokesman declined to comment on the hefty payout. Dittmer could not be reached for comment. Bennett's lawyer, Gary Naftalis, could not be reached for comment.
Nerby says that acknowledging the losses up front, instead of concealing them, would have reduced earnings at Refco and possibly reduced its capital. And Refco was "a thinly capitalized firm to begin with,'' he says
A reduction in working capital would have been particularly troublesome for Refco in the late 1990s, when it first considered the idea of an IPO. It would have jeopardized the firm's then-AA credit rating and made it far more costly to borrow money.
If Refco had revealed the true state of its finances, Bennett might have had a hard time convincing Bawag to invest in the brokerage. It certainly would have caused Thomas H. Lee Partners to walk away in 2004.
And don't you love how the largest commodities future broker in the US was a "thinly capitalized firm to begin with."
So here's a interesting article on Dittmer and Refco co-founder Ray E. Friedman's background:
Refco's flameout ends history of ups, downs By Elliot Blair Smith, USA TODAY
During the Vietnam War, Army Lt. Thomas Dittmer served the military as a social liaison to the White House, where he attended state dinners and made small talk with politicians and visiting businessmen and danced with their daughters.
Fresh off the Midwest plains, Dittmer used his White House connections to pay his stepfather a favor that otherwise would have been beyond either's reach. The man Dittmer called Pop was an obscure Sioux City, Iowa, businessman named Ray E. Friedman, who had been convicted more than a decade earlier of selling substandard chickens to Army troops during the Korean War. Friedman served two years in federal prison for that offense.
In June 1966, President Lyndon Johnson pardoned him. Last week, Dittmer, in a rare interview, confirmed to USA TODAY that he had helped rehabilitate his late stepfather's criminal record.
LBJ's intervention might have been the last time the reclusive Dittmer and the flamboyant Friedman welcomed Washington's influence. By the time of the presidential pardon, Friedman was on the rise again, amassing a fortune at the Chicago Mercantile Exchange. He traded cattle futures at a raucous new market there, launched in November 1964, that was prone to traders' excesses.
...
So Dittmer and his stepfather Ray E. Friedman were connected enough to get Friedman a pardon by Johnson. It could just be that Friedman's involvement in the cattle market and working at the White House was enough to get a Texas president to grant him a pardon, but there could be more under that rock so it’s a topic worth looking into. In an article about Dittmer marrying NY socialite Sandy Hill in 2001 it lists his parents, Evelyn Robertson and Marlin Dittmer, are listed in that article, so maybe they have some historical clout too (or not…who knows).
... Dittmer left the Army in 1966 and moved to Chicago to learn the commodities trade. Three years later, he and Friedman formed a partnership called Ray Friedman & Co. Eventually, the firm moved to New York, was renamed Refco and grew into a global trading powerhouse. Along the way, Friedman and Dittmer created riches for themselves and select clients while frequently clashing with regulators and less-fortunate investors.
Now, Refco courts ruin amid another criminal investigation. Dittmer's successor, Refco CEO Phillip Bennett, 57, was charged by federal authorities with a felony count of securities fraud last month. Today, Refco's regulated commodities trading business will be auctioned off in bankruptcy court while management and creditors sort out the tangled affairs of its unregulated investment businesses in the months to come.
Federal authorities acted after internal auditors at Refco accused Bennett of manipulating the firm's financial statements to disguise a $430 million personal debt to it. Bennett repaid the IOU and denies wrongdoing. But Refco investors responded to the scandal by pulling billions of dollars of capital. The liquidity drain forced the firm to seek bankruptcy-court protection from creditors.
Amid civil and criminal investigations, Refco's flameout is one of the most spectacular financial failures in U.S. history. More than $1 billion in investor capital evaporated between its initial public offering in August and its Oct. 17 bankruptcy filing. That is the swiftest crash of a public company on record.
Refco's unraveling is all the more remarkable because the firm handled more trades than do most of the world's financial exchanges. Its edge was electronically matching buyers and sellers through its own unregulated global trading platform.
"Refco — if they wouldn't have gone broke — in five years they would have been the exchange," says Dittmer. "That is the right business model." The legendary trader, now 63, cashed out the family stake in the firm and retired to a private life in the British Virgin Islands in 1999.
In what promises to be a major development in the easily spooked futures markets, Dittmer now plans to return to Wall Street, prompted by Refco's collapse and its effect on his and his stepfather's legacy.
He considered making an offer for Refco's assets in bankruptcy court, backed by Dubai, a member of the United Arab Emirates. Now Dittmer plans to form a venture with nephew Bradley Reifler to compete with it. Reifler, 45, Friedman's grandson, is a former star trader at Refco who says he left in 2000 after Bennett refused to sell him a stake in the firm.
...
It looks like the Dubai bidder was rejected.
... Las Vegas visitor
Friedman became a frequent visitor to Las Vegas, where he bought a hotel and casino. He hobnobbed with celebrities and showcased his card-playing skills. Back home, he showered gifts on a local panhandler who awaited him each day and a Native American youth for whom he arranged college tuition.
Whatever he spent, he made back in the markets.
But Refco's principals gave preferential treatment to some customers over others, according to some of the nearly 300 Commodity Futures Trading Commission enforcement actions, arbitration cases and customer reparations complaints brought against the firm and its principals since its founding.
One beneficiary of Refco's trading prowess in the late 1970s was Hillary Clinton, the wife of then- governor of Arkansas Bill Clinton and now a U.S. senator from New York. She converted a $1,000 short-term investment in cattle futures at Refco's Little Rock office into a $100,000 portfolio. Clinton's profits provoked a flurry of controversy on Capitol Hill after her husband was elected president, but neither she nor Refco were formally charged with any related wrongdoing. ...
Yep, Refco was part of Hillary's commodity controversy.
... Friedman and Dittmer also benefited by trading for themselves, relatives and friends. In 1983, the CFTC fined Refco and Dittmer $525,000 and suspended him from trading for four months for allegedly trying to corner some farm commodity markets.
Friedman and his wife retired to Palm Beach that year, but he continued to trade commodities. At 78, he, too, was sanctioned by government authorities in March 1992 when the CFTC issued fines of $590,000 against him and Refco, and suspended the septuagenarian for two months for allegedly trying to corner the frozen pork-bellies market.
Friedman's grandson, Reifler, also got caught up in the family trading frenzy, according to a customer- reparations complaint filed with the CFTC at the same time. Texas business executive Perry Esping, now deceased, complained that he lost $2.3 million by following a family trading strategy through Reifler that Friedman's grandson allegedly boasted "never fails, it works 100% of the time." Reifler disputes the recollection. The complaint was settled privately.
In 1994, Dittmer moved Refco from Chicago to Wall Street, reflecting his global ambitions. But the firm's rough-and-tumble regulatory history accompanied it and grew apace. In 1999, the CFTC fined Refco $6 million for massive record-keeping violations and lax internal controls and ordered it to pay $1 million more to fund an industry study to curtail customer abuses.
Under pressure, Dittmer resigned. Bennett, the smooth-talking, Cambridge University-educated financial professional whom Dittmer recently had promoted to CEO, added the title of chairman.
With Bennett at the helm, Refco pushed harder into fast-growing unregulated markets that served hedge fund and institutional customers, and further away from its traditional base of buying and selling agricultural commodities for individuals.
Bennett negotiated the acquisition of 16 smaller competitors and grew Refco revenue by nearly 24% a year through 2004. The firm's reach grew to encompass 200,000 customers in 14 countries. ...
Now check out this March 1988 article in the NY Times discussing the role that the futures market, and Refco, played in the stock market crash of 1987 and the evolution and growing importance of futures in the financial markets in the past couple decades:
SUDDENLY, IT'S CHICAGO
By MARTIN MAYER; MARTIN MAYER IS THE AUTHOR OF ''THE BANKERS.'' THIS ARTICLE DRAWS UPON HIS RESEARCH FOR ''MARKETS,'' WHICH WILL BE PUBLISHED IN JUNE. (NYT); Business World Magazine Late City Final Edition, Section 6, Page 23
IF DANTE HAD SEEN THE TREASURY BOND PIT AT the Chicago Board of Trade, he would have added another circle to his vision of hell. Imagine a ring of steps around an octagonal floor, about 35 feet in diameter on the top step, occupying the northwest corner of a wood-paneled trading room the width of a city block. Some 600 men and women stand jammed together in this pit, shouting and gesticulating, sometimes swaying in unison like tulips in the wind, from 8 o'clock in the morning when trading begins until 2 o'clock in the afternoon. Nobody goes to lunch, and few will risk losing their places by visiting the bathroom. Such abstinence is possible because almost everyone is under 35. (''Don't be confused by those gray heads you see,'' said the Virgil showing a visitor around. ''They're 28 years old, too.'') The Treasury bond pit works by open outcry, which means that each bid and offer is good only for the instant of utterance and must be incessantly repeated. The noise is devastating.
These men and women, with their primitive gestures and raucous calls, are buying and selling contracts to purchase, at a particular price on a particular future date, $100,000-face-value United States Treasury bonds with an 8 percent yield. On Black Monday, the New York Stock Exchange traded about $21 billion in stocks, and this one pit in Chicago traded more than $50 billion in Treasury bond futures contracts.
The prices ''discovered'' here are arguably the most important in the world. Interest rates on Treasury bonds are the strongest single influence on the exchange value of the dollar and on the movement of prices in the stock markets.
Other pits at the Board of Trade discover the prices of contracts for future deliveries of wheat and corn and soybeans, prices that predict what the farmer will get for his crops when they ripen and what the food processor will pay for his raw material. And half a mile away, in the new twin-skyscraper headquarters of the Chicago Mercantile Exchange, other traders and brokers, on black plastic steps and a floor with raised buttons to prevent sliding, bid for futures contracts in cattle and in pork bellies, 90- day Treasury bills, three-month dollar-denominated bank deposits in Europe (Eurodollars) and the Standard & Poor's 500 index. Trading in the S.&P. 500 index, which measures the movement of prices for something more than three-quarters of the value of the securities traded on the New York Stock Exchange, was $2.3 trillion last year; the volume on the exchange itself was $1.9 trillion. (Across the street from the Board of Trade at the Chicago Board Options Exchange, 1987 trading in the separate S.&P. 100 index was $2.4 trillion.) All this pricing of paper is very new. The New York Stock Exchange has been around for 196 years, and the Board of Trade has been trading foodstuffs since the 1840's, but the Treasury bond contract first appeared 10 years ago, and trading in the S.&P. 500 index began only in 1982. Today, three-quarters of the action in Chicago involves financial products rather than agricultural commodities. ...
Here's an interesting article about the history of the futures market.
... These instruments have already wrought a revolution in finance, with more to come. They are the means by which the over-advertised globalization of the markets is to be accomplished. The Board of Trade has a night session to accommodate Japanese customers, and the Merc - as the Mercantile Exchange is universally known - has reached an agreement with Reuters that will permit round-the-clock trading of all its contracts through the Reuters screens that serve the worldwide community of foreign exchange dealers.
Last month, a division of the Securities and Exchange Commission, reporting on ''The October 1987 Market Break,'' suggested that ''The character of the market has changed to the point where the 'price discovery' feature of the market is leading, rather than following, price trends in the underlying markets.'' Farmers have complained for generations that the gamblers in the futures pits determine the prices they receive when they sell their crops and livestock. Now the tail of financial futures wags the majestic dog of the New York Stock Exchange."
But the reason for this leadership from Chicago, the S.E.C. report stressed, was not a burst of public gambling; it was ''the increasing use of the futures market by institutional investors.'' The ardent defenders of the Chicago stock index contracts against those who would blame the futures market for the October crash have been these institutions - the big banks, the pension funds and the insurance companies - and the university professors and the establishment press.
Elephants are running in the squirrel cages and computers are their mahouts. ''The era of the individual trader is gone,'' says Tone N. Grant, president of Refco Group Ltd. ''We are in the era of the machine.'' Refco itself, by far the largest brokerage in the futures business worldwide, exactly illustrates the change from the derring-do of the speculator to the statistical strategies of the corporate C.F.O. ...
This is part of what makes Refco so potentially important: It was an industry leader in a segment of the financial sector that has revolutionized finance and enabled the globalization of financial markets.
... THE NAME REFCO COMES FROM THE INITIALS OF A MEAT--and-grain futures trader named Ray E. Friedman, now retired, who sold the business to his stepson, Thomas H. Dittmer, in 1974. A former Army guard in President Johnson's White House, Dittmer had become, under Friedman's guidance, one of the legendary traders on both the Mercantile Exchange and the Board of Trade. A scourge of the cattle pits, Dittmer was censured and fined by the Merc and the Commodity Futures Trading Commission for acquiring positions larger than the rules allowed in an apparent effort to push several markets around.
Now, after making a fortune variously estimated at $200 million to $400 million, supporting a life style of private jets, a baronial estate in Lake Forest, Ill., and a spectacular collection of contemporary American art that ornaments the Refco offices, Tom Dittmer has become, at 45, the all-but-invisible chairman and C.E.O. of a major financial services company.
Refco is open 24 hours a day in Chicago and New York and staffed with brokers who speak Japanese and the major European languages during the hours when the overseas customers are at work. There are branches in Lon-don, Paris, Zurich, Hamburg, Milan, Singapore and Sydney. The firm represents buyers or sellers for more than a fifth of the world's options and futures trading.[/b